next generation eu by country

We use cookies to function our website. Existing estimates, including my earlier ones, allocated these 2018 price amounts across countries, or reported the yearly breakdown of the total, but did not include the yearly breakdown per country in current prices in euros. The estimation of the expected country-allocation of gross pay-outs from the Commission’s initial May 2020 proposal for Next Generation EU (NGEU) was straightforward. Topic: European Macroeconomics & Governance. Table 1: Pay-out rates of the 2007-2013 ERDF, CF and ESF, Table 2: Pay-out rates of the 2014-2020 ERDF and CF. Figure 1: Historical EU structural fund pay-out rates and assumed pay-out rates from NGEU (%). But pay-outs from the EU budget are disbursed slowly to member states, partly because programmes have to be designed, approved and implemented, and must also pass various checks to ensure the proper use of EU funds. Together, the MFF and EU recovery package will … We do not know which countries will apply for loans: I assume that those 17 countries that borrowed from the EU’s employment-support loan facility SURE (temporary Support to mitigate Unemployment Risks in an Emergency) will also borrow from NGEU. But the programme and its Recovery and Resilience Facility amount to a high-risk gamble. The freedom EU countries have in designing national recovery and resilience plans might foster faster absorption of NGEU funds, since countries should know the investment areas where they can make the fastest progress. The initiative assumes support not only for the EU’s South, as previously speculated, but also Central Europe … This additional funding will be repaid over a long period of time through future EU budgets – between 2028 and 2058. Bruegel considers itself a public good and takes no institutional standpoint. Additionally, I have updated the expected cross-country allocation of ReactEU using most the recent quarterly GDP and unemployment data as well as the November 2020 forecast of the European Commission. NGI4ALL has received funding from the European Union’s Horizon 2020 research and innovation programme under the Grant Agreement no 825354. Fourth, I adjust the time profile of the Commission’s initial proposal for actual euro payments with the assumption that all payments that were planned by the Commission to be made after 2026 will be made in 2026. Second, we do not know which countries will apply for loans and whether they will get the full potential amount of 6.8% of GNI. “Next Generation EU”, the vast recovery program proposed by the European Commission on May 27th, was hailed as a “Hamiltonian moment” for the European Union. Commission Proposal May 2020. Project Acronym: 5G-Blueprint. However, the July 2020 European Council brought ambiguity, because it replaced the “unemployment criterion” with the “loss in real GDP” for 30% of RRF allocation, but did not specify how to measure it (see point 16 here). I assume it relates to current price values. In … Anyone is free to republish and/or quote this post without prior consent. However, the Commission’s Next Generation EU (NG-EU) plan contains very innovative instruments, and even though it is meant to be temporary, it could represent a step towards reforming Europe’s institutional set-up that has long been described in the literature as ‘incomplete’ (e.g. On the contrary, a much larger than average reduction is expected for Denmark, Estonia, Poland, Finland, Slovenia and Bulgaria. Of the recovery money, the European Commission expects only a quarter to be paid out in 2021-2022, while three-quarters will be paid out in 2023 and after. Next Generation EU shall “power a fair socio-economic recovery, repair and revitalise the Single Market, guarantee a level playing field, and support the urgent investments, in particular in the green and digital transitions, which hold the key to Europe’s future prosperity and resilience.” For example, Italy received four CSRs: 1) Address the pandemic, sustain the economy and support the ensuing recovery; later, when economic conditions allow, ensure public debt sustainability; 2) Provide income replacement, social protection, preserve jobs; 3) Provide liquidity to the real economy, promote public and private investment (here some concrete green and digital areas are listed: energy, research and innovation, sustainable public transport, waste and water management, digital infrastructure); 4) Improve the efficiency of the judicial system and the effectiveness of public administration. For 2026, I assume a growth rate similar to 2025. ), and additional resources required by common objectives linked to the green transition and the digital transformation. But absorption of EU funds is typically slow and some countries might struggle to spend what they can get, even if they will have broad freedom to design spending programmes. As a 2018 special report of the European Court of Auditors (ECA) highlighted, the rush to absorb funds can lead to insufficient consideration of value for money. For example, using this 2% annual inflation conversion, 100 euros at 2018 prices is equivalent to 106 actual euros in 2021 and 117 actual euros in 2026, which are the first and last year respectively when NGEU payments will be made. Such payments include advances, interim and final payments. The estimation of payments from the European Union’s COVID-19 economic recovery fund, Next Generation EU (NGEU), to each EU country in 2021-2026 involves uncertainties, yet the overall magnitudes can be estimated with a reasonable degree of precision. Thus, for 71% of NGEU grants and guarantees, the cross-country allocation was known. How much cake does everyone actually get and at what speed? This puts a question mark over whether the NGEU money can really be paid out as planned. To read about our cookie usage and our privacy policy click here. The estimation of yearly loan pay-outs from NGEU is much simpler, because the Commission in its initial proposal planned to make all commitments in 2021-2022 and all payments in 2021-2025, hence it is not impacted by the European Council’s new deadline of 2023 for commitments and 2026 for payments. In addition to the aggregate of grants and guarantees, I report calculations for NGEU loans. Zsolt Darvas First, I adjust the initial Commission proposal to the new timeframe by assuming that the commitments (measured at 2018 prices) planned by the Commission after 2023, will be made in 2023. Spolaore 2016, Cecchetti and Schoenholtz 2020). The multiannual financial framework, reinforced by the Next Generation EU, will be the main instrument for implementing the … In order to calculate how much each country is expected to get from NGEU in each year, estimating the difference between amounts measured at 2018 prices and at current euro values requires a careful consideration for the following reasons: Thus, the annual breakdown of actual euro amounts corresponding to the European Council conclusions cannot be easily calculated by just multiplying the actual amounts from the initial Commission proposal by the ratio of the Council totals to the Commission totals because the timeframe has changed, modifying the yearly distribution of 2018 price annual figures, which impacts the actual euro figures. The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal … Italy and Spain, the two largest expected beneficiaries of the NGEU in terms of euro amounts, are among the worst performers in terms of absorption of EU funds. By: Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post. Using these Commission estimates for RFF, I updated my estimates for the overall cross-country allocation of grant and guarantee payments from NGEU commitments at 2018 prices. This blogpost estimates the yearly Next Generation EU (NGEU) payments to each EU country at current prices in euros and as a share of GNI. France is not expected to suffer a reduction, while the reduction is expected to be much smaller than the average reduction in Czechia, Luxembourg , Malta, Portugal and Italy. For these reasons, it is the Commission's intention that Next Generation EU should not only favour Zsolt Darvas The Next Generation Internet initiative by the Digital Single Market of the European Commission. Analysing potential recovery spending and green investment through multiple dimensions. It may be a critical juncture in achieving greater financial solidarity among member states in a time of acute economic crisis in the aftermath of the COVID-19 pandemic. Spolaore 2016, Cecchetti and Schoenholtz 2020). The four proposals include: Extension of the Emissions Trading System (€10 billion per year) Country-specific recommendations (CSRs) are made in the context of the European Semester, the EU’s annual economic policy coordination mechanism. It didn't happen overnight, but it did happen. Darvas, Z. Existing estimates, including my earlier ones, allocated these 2018 price amounts across countries, or reported the yearly breakdown of the total, but did not include the yearly breakdown per country in current prices in euros. I assume it is the 2020 GNI measured at current prices. Date: September 24, 2020 Lindro - Next Generation EU: between frugal countries and a rising EU budget In an interview with Italian newspaper Lindro, Policy Fellow Thu Nguyen emphazises the importance of the Merkel-Macron Recovery Fund as an important step for the future of the EU. On 27 May, the European Commission announced a recovery plan for the EU economy, the key element of which is the creation of the Next Generation EU fund, planned to amount to €750 billion. Starting Date: 01/09/2020 [i] Sources for Figure 1 in detail: absorption rates for the 2007-2013 MFF are from the Commission’s ‘SF 2007-2013 Funds Absorption Rate’ dataset (which includes the European Regional Development Fund, Cohesion Fund and European Social Fund). To read about our cookie usage and our privacy policy click here. Project Name: Next generation connectivity for enhanced, safe & efficient transport & logistics. But estimating countries' repayments up to 2058 is extremely difficult. EU funding is considered to have been absorbed when money is paid out by the Commission to an EU country. Even this rather slow expected speed of NGEU disbursement would be rapid compared to the record of absorption of EU Structural Funds (Figure 1). Alongside other financial support previously mentioned, during the last plenary session at the end of May, European Commission President Ursula Von der Leyen stated:. “Next Generation EU”, the vast recovery program proposed by the European Commission on May 27th, was hailed as a “Hamiltonian moment” for the European Union. The grants portion largely tracks with a proposal put forward last week by German Chancellor Angela Merkel and French President Emmanuel Macron and would allow the Commission to borrow … See the methodology of these estimates here. These calculations were completed for each of the seven components of NGEU grants and guarantees (RRF, ReactEU, Just Transition Fund, EAFRD, rescEU, Horizon Europe, InvestEU), because each component has a different time profile of payments. Funded Under: H2020-ICT-2018-20 – Information and Communication Technologies. Nevertheless, for some programmes country-by-country envelopes exist. Thus, I alter the expected 2021 and 2022 RRF payments so that 10% of the total 2021-2026 payments will be made in 2021 and reduce the 2022 payments correspondingly, so that the sum of 2021 and 2022 payments (measured in current price euros) remains the same. The remaining facilities of NGEU accounted for 19% of total NGEU funds, not a decisively large amount, for which assumptions had to be made to estimate a cross-country distribution. Date: November 12, 2020 But estimating countries' repayments up to 2058 is extremely difficult. The implementation rates of CSRs have been rather poor and hence, at first sight, one might conclude that linking NGEU to CSRs will pose additional challenges. Revising my earlier estimates for the total cross-country allocations at 2018 prices. By: Currently, the November 2020 Commission estimates are available for GNI up to 2022, while the October 2020 IMF World Economic Outlook includes GDP forecasts for 2020-2025 (but no GNI data is available in the WEO). Several actions are performed by many EU countries to help other EU countries. The sum of the actual euro value of yearly commitments will have to be equal to sum of the actual euro value of yearly payments, hence I derived total euro payments in actual euros. Altogether, the amount of EU money to be absorbed from January 2021 will be several factors greater than earlier amounts. To help finance the post-coronavirus recovery, the European Union is raising large amounts to pass on to its members. The Special European Council of July 2020 defined the total amount of Next Generation EU (NGEU) commitments at 2018 prices. But because most of the funding is managed within the beneficiary countries, responsibility for conducting checks and annual audits lies with national governments. The focus should be on worthwhile spending, not just on absorbing EU funds. ), and additional resources required by common objectives linked to the green transition and the digital transformation. With the European Union for the first time taking on debt to help finance the economic recovery from the coronavirus, new resources are needed to fund the EU budget. Finally, one more adjustment is made: the European Council concluded that there will be a 10% pre-financing for the Recovery and Resilience Facility (RRF) in 2021, but it did not specify whether the 10% relates to 2018 price or current price values. If not handled correctly, the European Union’s transition to take on a new role as an issuer of public debt risks crowding out existing markets. - Belgium -, only a quarter to be paid out in 2021-2022, Regional Policy 2014-2020 EU Payment Details by EU Countries. Financing the Next Generation. The same expression, “loss in real GDP”, is used for ReactEU by the Commission referring to the “share of each Member State of the total loss of real seasonally adjusted GDP expressed in EUR between the first semester of 2019 and the end of the applicable reference period for all Member States considered”. Thus, for each component of NGEU, I estimate the current euro value of payments for each country, and then for each country, I add up the euro value estimates for the seven components to obtain the country-specific yearly payments from NGEU in actual euros. The calculations described so far relate to the EU as a whole. Then I distribute this total current price euro value pay-outs proportionally to the yearly distribution of the euro-value of pay-outs of the Commission’s initial proposal, which covers only the five-year period of 2021-2025. Ensuring effective recovery spending is a high-stakes challenge for the European Union, with the potential for derailment because of fuzzy objectives and overloaded procedures. It is time to rethink many of the basic principles of our economic model to mitigate the impacts of the COVID-19 pandemic. For the new EU Multiannual Financial Framework (MFF) period starting in January 2021, countries will have to absorb: (a) The remaining portions of the 2014-2020 MFF funds, which are rather large for many countries; (b) The ‘standard’ seven-year 2020-2027 MFF funds; and. Various ideas have been floated – including a digital tax and a financial transactions tax – but the most appropriate new resource would be revenues from the EU emissions trading system, which could provide enough funding to repay the EU's coronavirus borrowing. This makes designing a strong governance framework for NGEU even more important, in order to ensure that the money is well spent. Then, I used the methodology described above to estimate the payments in actual euros and as a share of GNI in each year in 2021-2026 for each EU country. However, the Commission’s Next Generation EU (NG-EU) plan contains very innovative instruments, and even though it is meant to be temporary, it could represent a step towards reforming Europe’s institutional set-up that has long been described in the literature as ‘incomplete’ (e.g. Their own contribution is EUR 12bn so on net we're looking at EUR21.5bn or around 9.5% of GDP over the next four years From 2021-2027 EU budget (the “traditional” EU funds) is to obtain EUR 46.3bn, which in line with expectations. The Commission has dubbed the plan Next Generation EU. Absorbing all these EU funds might prove to be an immense challenge. Under the proposal, the Commission would borrow the money on the financial markets using its high … For the largest component of NGEU, the Recovery and Resilience Facility (RRF), countries will have to prepare reform and investment proposals in their national recovery and resilience plans, which will be assessed by the European Commission and approved by the Council. This budget will be unique, as it will also be used to embed the EU’s recovery fund package, “Next Generation EU”, consisting of a further EUR 750bn worth of funds and investments in addition to the normal budget. To foster an efficient economic rebound post COVID-19 crisis, we propose instead to allocate funds through a forward-looking approach based on specific industrial and economic structure of EU regions. The European Council specified the total amounts of NGEU commitments at 2018 prices; The sum of yearly commitments measured at 2018 prices over the 2021-2023 period must be equal to the total amount set by the European Council; The EU budget includes actual euro amounts for both commitments and payments: the total euro amount of commitments made in 2021-2023 must be equal the total euro amount of payments in 2021-2026; In EU budgeting practice, as mentioned above, the 2018 price values are converted to actual euro values by assuming a 2% annual inflation rate, irrespective of the actual inflation rate; As such the time profile of commitments at 2018 prices has an impact on the actual euro amounts; Another implication is that since, as mentioned above, the actual euro amount of commitments over 2021-2023 equals the actual euro amount of payments in 2021-2026, the sum of 2018 price commitments over the 2021-2023 period will not be equal to the sum of 2018 price payments over 2021-2026; While the May 2020 Commission proposal was complete, including the yearly breakdown of the actual euro amounts of commitments and payments (from which one can calculate the 2018 price amount of commitments to confirm that the sum of annual amounts is equal to the 2018 price total amount), the European Council conclusions did not break down the annual values; The European Council changed the total amounts measured at 2018 prices relative to the Commission proposal and brought the cut-off dates closer, requiring that all NGEU commitments be made by the end of 2023 and NGEU payments be completed by the end of 2026. Many countries need comprehensive policy change to address its worst effects. Let me first present the results in the four tables below and then discuss the assumptions I made for the estimations. Estimates of payments countries will receive from the Next Generation EU instrument can be made with some degree of precision. On 21 July, EU leaders agreed on a €1.8 trillion package that should boost the recovery after the COVID-19 crisis, but also contribute to the advancement of key EU societal objectives, starting with the climate transition. How much cake does everyone actually get and at what speed? The size of the MFF - €1 074.3 billion - will allow the EU to fulfill its long-term objectives and preserve the full capacity of the recovery plan. It may be a critical juncture in achieving greater financial solidarity among member states in a time of acute economic crisis in the aftermath of the COVID-19 pandemic. This makes sense, because the EU budget is a well-established framework and hence can be deployed readily. Romania is to receive EUR 33.5bn from the Next Generation fund, split into EUR 16.8bn grants and EUR 16.7bn loans. EU leaders also agreed the 2021-2027 multiannual financial framework (MFF), setting a budget of EUR1.074 trillion. Von der Leyen said the plan — called Next Generation EU — would provide €500 billion in grants to countries hit hardest by the pandemic, and make another €250 billion available as loans.. The European Commission’s original allocation mechanism really favoured lower-income countries and to a large extent was based on pre-COVID economic data. Compared to the Commission’s May 2020 proposal, the overall allocation of grants was reduced by 11% by the European Council. Second, I multiple these 2018 price value amounts with the ratio of Council totals by the Commission totals to get the new time-profile of commitments at 2018 prices corresponding to the European Council conclusions. To deliver on the goals of the European climate law, the European Union needs finally to get coal out of its energy mix: the EU should quicken the pace of decarbonisation whilst delivering on its goal of social inclusion. EUROPE. Existing estimates, including my earlier ones, allocated these 2018 price amounts across countries, or reported the yearly breakdown of the total, but did not include the yearly breakdown per country in current prices in euros. Copyright © Bruegel 2015 Bruegel: Rue de la Charité 33-1210 Brussels Estimation of the country allocation of the Recovery Assistance for Cohesion and the Territories of Europe (ReactEU) can be done on the basis of the annex of the regulation proposal, which lists the mathematical formula and the various adjustments to it, even though estimation has to be based on forecasted GDP and unemployment  developments. There are two uncertainties related to NGEU loans. - Belgium -, There is a difference between commitments (a promise to pay) and payments (money actually disbursed) in the EU budget (see an explanation of this differentiation. European Union green bonds, as promised by European Commission president Ursula von der Leyen, might be better linked to the bloc's achievement of its climate goals, rather than project-by-project green criteria. ReactEU accounted for an additional 10% of NGEU funds. Will this freedom be enough to overcome the hurdles to EU fund absorption? My calculations address these issues in five steps. As a consequence, by using the Commission’s May 2020 economic forecasts, I estimate that only Germany and France will get more grants from the EU’s recovery fund compared to the Commission’s original proposal, while other countries will get less. Without the backing of all 27 EU member states, it cannot go ahead. Opinions of the EU – both positive and negative – have remained unchanged since 2017 in all but three countries. Third, I calculate the corresponding actual euro value of commitments. Copyright © Bruegel 2015 Bruegel: Rue de la Charité 33-1210 Brussels The European Commission’s vision is for these programs to last from 2021-2027 as part of the EU budget. The 2018 price amounts are hypothetical because in EU budgetary practice, a 2% annual rate of inflation is used to translate 2018 prices in euros to actual prices in euros, irrespective of actual inflation. This blogpost estimates the yearly Next Generation EU (NGEU) payments to each EU country at current prices in euros and as a share of GNI. The European Council set an amount of €390 billion at 2018 prices for grants (which also includes some guarantees). I also report these payment estimates as a share of yearly gross national income (GNI). The money will need to be repaid by the end of 2058 and will come out of the EU’s budget, meaning countries that contribute more, like Germany, will be shouldering more of the financial burden. In its proposed Recovery Fund, the European Commission uses allocation criteria mainly linked to infection rates and past economic performance. Effective contribution to the green and digital transition shall also be a prerequisite for a positive assessment.”. To approximate the expected pay-out rate end-2020, I assumed that the average daily pay-out amounts from 1 January to 11 September 2020 will be made on average from 12 September to 31 December 2020. In France, support for the EU increased from 56% in 2017 to 62% in 2018. That money will come from the €750 billion fund, known officially as "Next Generation EU." Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post. Lindro - Next Generation EU: between frugal countries and a rising EU budget In an interview with Italian newspaper Lindro, Policy Fellow Thu Nguyen emphazises the importance of the Merkel-Macron Recovery Fund as an important step for the future of the EU. ECA argued that the actions taken by the Commission and member states to tackle slow absorption of the 2007-2013 funds “focussed mainly on absorption and legality, but did not take due account of performance considerations” (paragraph 87). Inequality is both a consequence of the pandemic and a cause of its severity. If not handled correctly, the European Union’s transition to take on a new role as an issuer of public debt risks crowding out existing markets. Next Generation EU. Opinion has soured, however, in Hungary (down 10 percentage points) and the UK (down 6 … But estimating countries' repayments up to 2058 is extremely difficult. I also report the NGEU payments as the share of GNI. The EU should work with member countries to identify limited policies that will maximise the impact of EU investment, while accounting for spillovers. EU budgets include two types of numbers: ‘commitment appropriations’, which are ceilings on spending promises, and ‘payment appropriations’, which are ceilings on possible payments. The NGI.eu portal is run by NGI4ALL, which is part of the NGI initiative. Next Generation EU. To deliver on the goals of the European climate law, the European Union needs finally to get coal out of its energy mix: the EU should quicken the pace of decarbonisation whilst delivering on its goal of social inclusion. It also opens the door to some central tax collection. I assume that €120 billion (at 2018 prices) will be committed in each year in 2021-2023 and calculate the corresponding euro value of commitments. After five days of deliberation, negotiation and compromise, leaders of the 27 governments that make up the European Union (EU) unanimously agreed to an unprecedented €750 billion "Next Generation EU" (NGEU) Recovery Fund - to support member countries' recovery from the pandemic-induced recession, and multinational financial … One piece of what was released today is a reminder of some tax proposals that remain on the EU agenda. Managing that transition correctly is almost as big a challenge as spending the money itself. Thus, the natural conclusion was that the loss in real GDP means the same for ReactEU and RFF and I used this assumption to estimate the new allocation of the RFF. Estimates of payments countries will receive from the Next Generation EU instrument can be made with some degree of precision. Join NEXTGen. A glimmer of hope, however, is appearing on the horizon for many of these countries. Von der Leyen said that the fund, which is dubbed Next Generation EU and must be endorsed by every country, is “providing an ambitious answer,” … But in fact, the link provides great freedom to member states, because the 2020 CSRs, quite naturally, ask member states to address the consequences of the COVID-19 crisis, which they are doing anyway. The Commission did not provide any explanation of the estimation methodology, nor any hint why the “loss in real GDP” means different things for RRF and ReactEU. Slow implementation and low absorption capacity are major problems, yet absorption of EU funds cannot be an objective in itself. The impact of EU debt on the EU market of safe assets. It’s a pity that the EU’s landmark recovery facility suffers from issues of transparency. Topic: European Macroeconomics & Governance. For the 2014-2020 period, Spain had absorbed only 39% of the money it was due from European Structural Investment Funds (ESIFs) by 23 September 2020 – the EU’s worst rate – while Italy at 40% is also among the slowest. In my calculations, I find that for the EU as a whole the amount of €390 billion in 2018 prices decided by the European Council for grants and guarantees will lead to €420 billion in actual euro payments. 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