Debate: Borrowing strategy to finance NextGenerationEU
Date: MONDAY, 21 NOVEMBER 2022
Speaker: Johannes Hahn
Language: EN

Indeed, financing NextGenerationEU through joint EU issuances required a significant expansion of the Commission’s step management architecture. Building on its previous experience as an issuer and with technical support from Member States and the ECB, the Commission established a state—of—the—art borrowing and lending programme underpinned by a reliable payments settlement and accounting infrastructure in a very short period of time. Actually, we moved immediately from, let’s say, a regional player to a Champions League player. And I have to admit this was not without risks but finally it worked, and I would like to thank also my people in DG BUDG for this extremely challenging time and the way how they have managed it. Based on this, we have now defined a so—called diversified funding strategy. And this funding strategy is embedded in a robust governance and risk mitigation framework. NextGenerationEU borrowing and lending operations have been a success. This was already mentioned by the previous speakers. Despite the challenging market conditions, the Union has been able to fund its operations successfully. Thanks to the diversified funding strategy, we have already mobilised more than EUR 160 billion, of which almost EUR 30 billion in the form of green bonds to fund the European recovery and to build a greener, more digital and more resilient Europe. Each of our transactions has enjoyed strong market support from a diverse set of investors from all over the world. So far we have seen, I think, around 1 000 investors from around 70 countries. This strong demand demonstrates that the Commission has established itself as an important and trusted issuer in euro debt capital markets, raising the required funds in time and at the competitive cost of funding. As a result, the Union has transformed from, as I said already, a small supranational issuer to a large sovereign—scale issuer at the same level as the big European countries: Germany, Spain, France, Italy. The diversified funding strategy has proved a success. That’s why the Commission intends to finance also other EU loans, including the EUR 18 billion macro—financial assistance support package for Ukraine through the diversified funding strategy. Therefore, we have put forward on 9 November a proposal to the European Parliament and the Council to modify the financial regulation to allow for this. But I understand on this there will be a separate debate on Wednesday. Through this modification of the financial regulation, the diversified funding strategy will be established as the mainstream funding method for any new programmes to be funded by debt issuance. This would be in the interest of the Union, Ukraine and any other further recipients of EU loans. Bringing all the borrowing and lending programmes under the same umbrella would improve the volume and liquidity of EU bonds leading to more attractive terms of buying. This would benefit both the recipients of EU loans and the EU budget. Moreover, the diversified funding strategy gives more flexibility in the timing of the loans. In the case of Ukraine, this will help to better respond to the needs of the Ukrainian authorities. A swift adoption of this proposal by the co—legislators is therefore key so that we can start financing the loans to Ukraine in the most effective, predictable and attractive manner as of early next year. I appreciate the proposals put forward in the European Parliament’s own—initiative report with a view to further enhancing the Commission’s borrowing and lending operations, including the need to work with market participants to stimulate secondary market liquidity of EU bonds. The Commission attaches great importance to these issues and is working to ensure the pricing of EU bonds better reflects the EU’s credit quality and liquidity. Another proposal in the own—initiative report that I would like to highlight is the prevention of greenwashing via the green bonds framework, which we take very seriously and we fully support this, of course. This is why we have put in place a state—of—the—art NextGenerationEU green bond dashboard, which provides full transparency about how the financing raised from NextGenerationEU green bonds is invested. In addition, the Commission will publish in the coming weeks its first green bond allocation report. So I really invite you to look at this green bond dashboard. We are currently on a weekly updated basis. You can see all the different projects which are financed via green bonds and, I suppose, as of beginning of next year it will be on a daily basis updated. So finally, I concur that this is key to keep the European Parliament fully involved. The Commission is strongly committed to reporting to Parliament on its issuance and debt management strategy, as we have done since the start of the NextGenerationEU programme and our proposal to bring the diversified funding strategy in the scope of financial regulation would further strengthen the role of the European Parliament in the oversight. So also in this context, I look forward to the continued cooperation with the European Parliament on this file.