Economic Indicators1 hour ago (Oct 13, 2020 08:55AM ET)
© Reuters. FILE PHOTO: ECB headquarters in Frankfurt
BRUSSELS (Reuters) – European Union countries will jointly borrow and then spend 750 billion euros ($880 billion) over the next three years to lift the economy out of the deepest recession in the history of the bloc, caused by the COVID-19 pandemic.
Below are details of how the money is to flow:
HOW MUCH MONEY IS THERE FOR EU GOVERNMENTS?
Of the total 750 billion euros to be borrowed by the EU, 360 billion is to be distributed in cheap loans and 312.5 billion in grants. The remaining 77.5 billion will be spent on other EU schemes addressing the fallout of the COVID-19 pandemic.
HOW CAN GOVERNMENTS GET IT?
EU governments have to say what they want to spend the money on in “recovery and resilience plans” – coherent packages of reforms and investment projects to be implemented up to 2026.
The European Commission will check these plans to see whether they are in line with what the Commission itself has prescribed in its annual recommendations for each EU country.
WHAT SHOULD IT BE SPENT ON?
At least 37% of the money should go towards projects that help protect the environment and prevent climate change, and at least 20% on digitalizing economies.
Cash can be requested for projects that started from Feb. 1, 2020, onwards.
FORMULA FOR WHO GETS HOW MUCH
Out of the 312.5 billion euros in grants, 70% will be allocated in 2021 and 2022. Allocations will proportional to a country’s population, the inverse of its per capita GDP and its average unemployment rate in the period 2015-2019.
For the remaining 30%, in 2023, instead of the 2015-2019 unemployment rate, the formula will use “the loss in real GDP observed over 2020 and … the cumulative loss in real GDP observed over the period 2020-2021”.
WHEN WILL GOVERNMENTS GET THE MONEY?
In the first half of 2021, at the earliest, governments can get pre-financing of up to 10% of the total amount approved in their respective plans.
The rest will be paid out in instalments, if and when the approved projects reach agreed milestones and targets. It will be checked by the Commission and EU governments. If some governments believe others have not met the criteria for further disbursements, they can ask for the payment to be held up pending discussion by EU leaders at their quarterly summit.
WHEN CAN GOVERNMENTS APPLY?
The plans are to be formally submitted from Jan 1, 2021 to April 30, 2021, but governments can begin sending them from Oct. 15, so that they can be discussed with the Commission and ready for approval as soon as the money is legally available.
The EU aims to launch the whole recovery scheme formally on Jan. 1, but that date depends on parliaments in the 27-nation bloc ratifying the EU recovery plan by then so that the Commission can borrow money on the market to disburse.
($1 = 0.8485 euros)
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.