Econostrum | Economic News in the Mediterranean

European recovery instrument NextGenerationEU gets an additional €9bn

Written by Frédéric Dubessy on Tuesday, May 17th 2022 à 15:35 | Read 202 times

The European Commission has very easily managed to raise an additional €9 billion under its NextGenerationEU recovery instrument, bringing the total amount issued in 2022 alone to €40 billion.

EU. On Thursday 12 May 2022, the European Commission issued an additional €9bn in a two-tranche operation under the NextGenerationEU recovery instrument. This is the fourth bond syndication of the year.

This temporary instrument was proposed at the end of May 2020 by the European Commission, adopted in July 2020 and backed up to the 2021-2027 Multiannual Financial Framework in November 2020 by the European Parliament and the European Council. It aims to help European Union (EU) Member States recover from the impact of the Covid-19 pandemic on their economies with the strong ambition to build a greener, more digital and more resilient Europe.

"This transaction consists of a new €6bn three-year bond maturing on 4 July 2025 and a €3bn top-up to an existing 30-year bond maturing on 6 July 2051," the European Commission said. It is the first three-year bond issued by the Commission as part of its diversified funding strategy and thus provides the institution with the full spectrum of maturities from three to 30 years.

More than 16 times oversubscribed

The issue was more than 16 times oversubscribed for the 30-year bonds, with bids exceeding €48bn, and more than nine times for the 3-year bonds (order book exceeding €56bn). This makes it NextGenerationEU's most oversubscribed issue to date. "The fact that today's transaction went well is further evidence of the interest in the EU as an issuer, even in volatile markets. The funds raised continue to serve EU citizens, businesses and communities, supporting Europe's recovery and resilience," commented EU Budget Commissioner Johannes Hahn.

Fund managers (34% of the total), central banks and official institutions (31%), bank treasuries (18%), insurance and pension funds (11%) were the most likely to take up the new three-year bond. Satisfied applicants came mainly from Northern European countries: 29% from the UK, 14% from the Nordic countries and 9% from Germany. France, Italy and the Middle East-Africa region followed with a share of 7% each.

For the 30-year bond, insurance and pension funds (28%), fund managers (24%), bank treasuries (24%) and central banks and official institutions (14%) lead. Again, the northern countries have subscribed the most: 18% for the Nordic countries, 13% for the Benelux countries and 12% for the UK.

Under its NextGenerationEU programme, the European Commission has so far issued €111bn of long-term funding (€40bn since January 2022), of which €23bn is in the form of green bonds. It plans to borrow around €800bn on the capital markets by the end of 2026. Up to €723.8bn will be made available under the Recovery and Resilience Facility and €83.1bn will support key EU programmes.

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