Econostrum | Economic News in the Mediterranean

European Council endorses the use of a common debt issue

Written by Eric Apim on Tuesday, June 1st 2021 à 16:15 | Read 386 times

The heads of state and government of the twenty-seven member countries of the European Union will borrow jointly for the first time (photo: European Council)
The heads of state and government of the twenty-seven member countries of the European Union will borrow jointly for the first time (photo: European Council)
EU. Late Monday evening, May 31, 2021, the twenty-seven Member States of the European Union (EU) validated the process of issuing a common debt from their own resources to finance the resilience of post-Covid European economies. The decision, which authorizes the European Commission to borrow €750 billion on the capital markets on behalf of the EU, enters into force on Tuesday, June 1, 2021. This is unprecedented. The Union also provides for a temporary increase (while the recovery is being supported) of 0.6 percentage points in the maximum amount the EU can request from member states to cover its financial obligations. "It will serve as a guarantee and allow for better borrowing conditions on the market," says a European Council statement.

Meeting in the European Council, the representatives of the Twenty-Seven thus give the green light to the European Commission to implement its recovery plan "NextGenerationEU", adopted in July 2020 and backed by the 2021-2027 Multiannual Financial Framework (MFF) voted in November 2020. €672 billion in grants and loans. In all, a total of €750 billion (see breakdown in table below) allocated to national programs will be granted to EU countries through massive borrowing. Spain and Italy, the countries most affected by the consequences of the socio-economic crisis generated by the pandemic, will be the main beneficiaries and will receive €69.5 billion and €68.9 billion respectively, compared to €39.4 billion for France.


Funding based on national recovery plans

António Costa called this agreement "a great day for the European Union". For the Portuguese Prime Minister, "the national governments and parliaments of the EU 27 have shown a great sense of solidarity and responsibility. We cannot afford to lose any more time. We must ensure the rapid approval of the first recovery and resilience plans by the end of June." Portugal, the country currently holding the rotating EU presidency will receive €13.9 billion.

The European Commission will use these national plans - including targets, milestones and estimated costs - as a basis for releasing the money to support Member States in their public investments and structural reforms.

The first payments to governments will be for pre-financing of projects in the field of green and digital transition. Representing 13% of the total grants allocated to each Member State, they should be made in July 2021.

Breakdown of NextGenerationEU (source European Commission)

Recovery and Resilience Facility 672,5 bn€
of which loans 360 bn€
of which grants 312,5 bn€
ReactEU 47,5 bn€
Horizon Europe 5 bn€
InvestEU 5,6 bn€
Rural development 7,5 bn€
Just Transition Fund (FTJ) 10 bn€
rescUE 1,9 bn€
TOTAL 750 bn€

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