International Financial Law Prof Blog

Monday, May 3, 2021

The largest EU stimulus package ever

The EU’s long-term budget, coupled with NextGenerationEU, the temporary instrument designed to boost the recovery, will be the largest stimulus package ever financed through the EU budget. A total of €1.8 trillion will help rebuild a post-COVID-19 Europe. It will be a greener, more digital and more resilient Europe.

The new long-term budget will increase flexibility mechanisms to guarantee it has the capacity to address unforeseen needs. It is a budget fit not only for today's realities but also for tomorrow's uncertainties.

The last step of the adoption of the next long-term EU budget was reached on 17 December 2020.

Main elements of the agreement

Multiannual Financial Framework 2021-2027
total allocations per heading*

	MFF	NextGenerationEU	TOTAL
1. Single market, innovation and digital	€132.8 billion	€10.6 billion	€143.4 billion
2. Cohesion, resilience and values	€377.8 billion	€721.9 billion	€1 099.7 billion
3. Natural resources and environment	€356.4 billion	€17.5 billion	€373.9 billion
4. Migration and border management	€22.7 billion	-	€22.7 billion
5. Security and defence	€13.2 billion	-	€13.2 billion
6. Neighbourhood and the world	€98.4 billion	-	€98.4 billion
7. European public administration	€73.1 billion	-	€73.1 billion
TOTAL MFF	€1 074.3 billion	€750 billion	€1 824.3 billion

_{All amounts in € billion, in constant 2018 prices.} _{Source: European Commission}

_{* The amounts include the targeted reinforcement of ten programmes for a total of €15 billion, compared to the agreement from 21 July 2020. The programmes are Horizon Europe, Erasmus+, EU4Health, Integrated Border Management Fund, Rights and Values, Creative Europe, InvestEU, European Border and Coast Guard Agency, Humanitarian Aid.}

NextGenerationEU

NextGenerationEU is a €750 billion temporary recovery instrument to help repair the immediate economic and social damage brought about by the coronavirus pandemic. Post-COVID-19 Europe will be greener, more digital, more resilient and better fit for the current and forthcoming challenges.

The Recovery and Resilience Facility: the centrepiece of NextGenerationEU with €672.5 billion in loans and grants available to support reforms and investments undertaken by EU countries. The aim is to mitigate the economic and social impact of the coronavirus pandemic and make European economies and societies more sustainable, resilient and better prepared for the challenges and opportunities of the green and digital transitions. Member States are working on their recovery and resilience plans to access the funds under the Recovery and Resilience Facility.
Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU): NextGenerationEU also includes €47.5 billion for REACT-EU. It is a new initiative that continues and extends the crisis response and crisis repair measures delivered through the Coronavirus Response Investment Initiative and the Coronavirus Response Investment Initiative Plus. It will contribute to a green, digital and resilient recovery of the economy. The funds will be made available to
- the European Regional Development Fund (ERDF)
- the European Social Fund (ESF)
- the European Fund for Aid to the Most Deprived (FEAD)
These additional funds will be provided in 2021-2022.
NextGenerationEU will also bring additional money to other European programmes or funds such as Horizon2020, InvestEU, rural development or the Just Transition Fund (JTF).

NextGenerationEU breakdown

Recovery and Resilience Facility (RRF)	€672.5 billion
of which, loans	€360 billion
of which, grants	€312.5 billion
ReactEU	€47.5 billion
Horizon Europe	€5 billion
InvestEU	€5.6 billion
Rural Development	€7.5 billion
Just Transition Funds (JTF)	€10 billion
RescEU	€1.9 billion
TOTAL	€750 billion

_{Source: Conclusions of the European Council of 21 July 2020}

Figures

NextGenerationEU figures per EU country

Recovery and Resilience Facility: grants allocation per Member State
REACT-EU: allocations 2021
Just Transition Fund: allocations per Member State
European Agricultural Fund for Rural Development: allocations per Member State

MFF figures per EU country

Financing the EU long-term budget and NextGenerationEU

The EU long-term budget will continue to be financed through the well-known revenue sources of the EU budget:

customs duties
contributions from the Member States based on value added tax (VAT)
contributions based on gross national income (GNI)

In addition, as of 1 January 2021, a new national contribution based on non-recycled plastic packaging waste will be introduced as a source of revenue of the EU budget.

Borrowing to finance the recovery

To finance NextGenerationEU, the European Commission - on behalf of the European Union – will borrow on the markets at more favourable rates than many Member States and redistribute the amounts. For the Commission to start borrowing, all Member States must ratify the new Own Resources Decision in line with their constitutional requirements.

The European Commission already issues bonds to finance loans to EU and third countries under four programmes, including up to €100 billion for the SURE programme to support jobs and keep people in work.

To raise up to around €800 billion in current prices until 2026 for NextGenerationEU under the best financial terms – 5% of EU GDP – the Commission will use a diversified funding strategy.