May 19, 2021
19:35
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While almost half of the European recovery plan consists of loans, only six states have requested them to date.
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This was the heart of the showdown between the “frugal” countries and the others, during the design of the European recovery plan: what part of the envelope would be distributed directly to the Member States in the form of subsidies, and what part would be allocated in the form of loans? A year ago, Angela Merkel and Emmanuel Macron proposed a European recovery plan of 500 billion euros, exclusively in the form of subsidies. Two months later, the Twenty-Seven decided on a plan of 390 billion euros in spending and an envelope of 360 billion euros in loans to member states. Gold, this line of credit is currently enjoying very mixed success.
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Of the eighteen countries that have submitted their recovery and resilience plan to the European Commission, only six have applied for a loan and the envelope is currently only used at 42% of its potential. Italy is by far the most interested country (122.6 billion euros requested), ahead of Poland (12.1), Greece (12.7), Portugal (2.7), Slovenia (0.7) and Cyprus (0.2). Belgium and large countries such as Germany, France or Spain have not shown interest to date.
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Between advantages and constraints
The carrots are not cooked, since the Twenty-Seven have until August 2023 to apply for a loan. The European Commission therefore does not draw any conclusions at this stage: “To carry out an assessment is premature”, says Marta Wieczorek, spokesperson.
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In the meantime, the weak enthusiasm of states for European loans is hardly surprising. “I expected such a result, reacts a diplomatic source. Some Member States are already receiving a lot of money with the subsidies on the table. the rates are very low: for many countries, there is no real interest in borrowing through this channel. Not to mention all the conditionalities that are linked to these loans. “The conditions for obtaining loans are identical to those for obtaining subsidies – to obtain them, the States must justify to the Commission higher financing needs linked to additional reforms and investments.
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“For countries which have good access to financial markets, there are not so many advantages, while there are rather heavy reporting constraints, confirms a federal source. In the case of Belgium, at this stage, it was not considered interesting to call on these loans.“Without however closing the door for the future. To achieve the investment objective of 3.5% that Belgium has set for 2024, each entity will have to do its accounts. European subsidies only represent half of what must be invested during the legislature to be credible. “The question is: how to finance this envelope? Every government is going to have to ask it. “
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Wallonia could consider making a request at a later stage.
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The recovery and resilience facility’s loan envelope is of no interest to the federal and Flemish levels, another source indicates. However, the question remains open for the other two regions. – Wallonia could consider making a request at a later stage, we told the Budget Minister’s office.
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Like an echo
The still very partial use of stimulus loans is reminiscent of the fate of the first envelope of loans created by the countries of the euro zone to respond to the pandemic. Last spring, finance ministers announced a package of emergency measures to respond to the pandemic, the big part of which consisted of a loan facility for member states: a line of credit of 240 billion euros through the Mechanism. European Stability Policy (MES). To date, no one has used it. A failure that the boss of the MES, Klaus Regling, put into perspective during a seminar at the Belgian Financial Forum earlier this month, stressing that the very existence of this financing possibility “has helped to create a positive mood in the financial markets” .
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Today, the European Commission is promoting a “package of stimulus measures” of 1,800 billion euros, the bulk of which is none other than the traditional multiannual budget of the Union. When entering the station, the real stimulus package, the 750 billion euros of “Next Generation EU”, may be losing some of the promised wagons along the way.
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The summary
- Of the eighteen Member States which have handed over their recovery plan to Europe, only six have requested the envelope of 360 billion euros in loans.
- The tool is very restrictive but is of little interest to countries which do not have financing difficulties.
- Belgium has not appealed to it, but is not closing the door – Wallonia could express its interest at a later date.
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