“It is important to reach an agreement on the European Budget”, says commissioner who led EU bond issue

The first financing operation of the SURE program "was a success", said the European budget commissioner, Johannes Hahn. He said he hoped it would be a 'game changer' for negotiations on the European budget, which are an obstacle to Community financial aid.

The stalemate in the negotiations for the European Union Budget between 2021 and 2017 - the Multiannual Financial Framework (MFF) - must be quickly resolved because it delays the process of implementing Community financial support to assist the Member States of the European Union (EU) in economic recovery. "We have to reach an agreement quickly," said budget commissioner Johannes Hahn.

The European Commissioner said this Wednesday that, after the “success” of the 17 billion euro community debt issue that will be allocated to Member States in the form of loans, “the important thing now is to have an agreement [on the European budget] , have your approval and raise funds ”for countries.

Johannes Hahn highlighted the importance of unblocking negotiations between the European Parliament and the European Council, which make it difficult to approve the MFF budget, at a press conference on the issue of € 17 billion of social bonds to finance the Sure program - Support to mitigate Unemployment Risks in an Emergency - that took place this Wednesday.

The European commissioner, who led the issuance of this long-term bond loan made yesterday, raised by the European Commission on behalf of the EU, said the transaction was “a success” and that it could be a “game changer for those who have to reach a final agreement ”, referring to Parliament and the Council.

In view of the increase in new cases of Covid-19 in European territory, Johannes Hahn stressed that “the situation is critical for Europe to give a strong response. That is why I call on both co-decision makers, the Council and Parliament, to work hard to reach an agreement as soon as possible to give us the means to meet the pressing needs of our people and to overcome the crisis ” .

The Recovery Fund approved in July by the Council, with an overall amount of € 750 billion between grants and loans, depends on the European budget. With the date scheduled for the beginning of the implementation of the Fund, on January 1, 2021, it is then urgent that Parliament and the Council reach an agreement on the MFF.

Among Parliament's wishes are to strengthen the role of MEPs in the Recovery Fund and to strengthen the rule of law oversight mechanism ('rule of law') linked to the distribution of funds under the European financial support program.

Debt issuance "was a sign of the EU's confidence as an issuer"

The bond issue carried out yesterday, whose demand has exceeded supply by 13 times, to finance the SURE program, "was a sign of confidence in the EU as an issuer," said Johannes Hahn.

The SURE program, with a global amount of 100 billion euros, is financed through the issuance of social bonds, and a line of financial support that the European Union (EU) grants to Member States that, through loans with the Union in favorable conditions, they can access funds to mitigate the economic and social impacts caused by Covid-19.

Bonds were issued in two tranches, both with a long-term maturity, of ten and twenty years. The first, in the amount of ten billion euros, with maturity up to October 2030, was placed with a yield of -0,238%. The second, with maturity up to 2040, in the amount of seven billion euros, was placed with a yield of 0,131%.

The EU further explained that the operation had record demand, which amounted to 233 billion euros - the demand for ten-year bonds amounted to 145 billion euros, while demand for twenty-year bonds reached 88 billion euros. euros.

In view of the result of the operation, the European commissioner said that “ideally we could have raised 233 billion euros, which is a sign of the great interest of the market and confidence in the EU as an issuer” of debt.

Johannes Hahn also addressed the next steps in EU funding. “Until the end of 2020 and in 2021 we will continue to issue bonds to finance SURE and Next Generation EU. The total volume of debt expected to rise until 20220 is at least EUR 30 billion and, by mid-2021, we expect to start issuing debt to finance the Next Generation EU. By 2026, we will issue bonds of up to 900 billion euros, most of which will occur between 2021 and 2024 ”.

Portugal can borrow up to 5,9 billion euros in the SURE program

Loans under the SURE program will support Member States, covering the costs related to short-term public financing to protect employment. In addition, SURE funds may also be channeled to address issues related to health, particularly in the workplace, in order to ensure security in the resumption of economic activity.

Last September 25, the EU Council approved a financial support of € 87,4 billion under the SURE program and gave the green light to 16 Member States, including Portugal, in order to take out loans whose funds are used to protect employment and mitigate social risks. Altogether, the European Commission intends to issue social bonds up to 100 billion euros, with Portugal being able to borrow up to 5,9 billion euros.

The Council of the European Union approved on 25 September the financial support of 87,4 billion euros in the form of loans under the SURE program, which includes the 5,9 billion euros requested by Portugal and which has already they had had the 'green light' of Brussels.

The European Commission concluded yesterday, on behalf of the European Union (EU), the first financing operation of the SURE program, having placed 17 billion euros in social bonds. According to an EU statement released yesterday, it was "the biggest supranational transaction ever".

The issue was led by European budget commissioner Johannes Hahn, who, quoted in the statement, said it was the “biggest social transaction ever and approximately 63% of the two tranches were allocated to ESG investors”.

Quick Answers: How will the European Commission's issuance of social bonds work?

 

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