It is true that the EU Commission is successfully conducting the issuances of European bonds within EU Sure Programme, but the governments are calling for the acceleration of raising capital for the Recovery Plan. French finance minister Bruno Le Maire launches a criticism that is shared by the majority of governments: “the funds must arrive as soon as possible”.
On Wednesday 27 January, the European Commission has issued a €14 billion 7-year bond priced at a negative yield of -0.497%, under the EU SURE instrument to help protect jobs and people in work, by distributing the resources amongst member states.
The issuing consisted of two bonds. €10 billion due for repayment in June 2028 and €4 billion due for repayment in November 2050, with s high demand among investors. The 30-year bond was priced on the slightly positive territory, at 0.134%, which is an excellent result for this maturity. (See here for more details on the pricing of the transaction).
The tensions of the governments, now led by the French minister Le Maire, perhaps also stems from a paragraph of a Commission press release that reads “Later this year, the Commission is due to also launch the borrowing under NextGenerationEU, the recovery instrument of €750 billion (in 2018 prices) to help build a greener, more digital and more resilient Europe.”
Other bond issuances
This has been the fourth bond issuance under the EU SURE programme. So far and thanks to the first three issuances between late-October and end-November last year, 15 EU Member States received nearly €40 billion in back-to-back loans under SURE.
Throughout 2021, the Commission will seek to raise a further €35 billion through issuance of EU SURE bonds.
Later this year, the Commission is due to also launch the borrowing under NextGenerationEU, the recovery instrument of €750 billion (in 2018 prices) to help build a greener, more digital and more resilient Europe.
EU SURE Programme
The Council has approved a total of €90.3 billion in financial support to 18 Member States under SURE.
In 2020, the Commission disbursed a total of €39.5 billion to 15 EU Member States: Italy, Spain, Poland, Greece, Croatia, Lithuania, Cyprus, Slovenia, Malta, Latvia, Belgium, Romania, Hungary, Portugal and Slovakia, following three EU SURE issuances.
The 2020 amounts were raised in three operations, carried out on 20 October 2020, 10 November 2020 and 24 November 2020. All the bonds issued under SURE were largely oversubscribed – between 11.5 and 13 times, resulting in very favourable pricing terms.
The bonds issued by the EU under SURE benefit from a social bond label. This provides investors with confidence that the funds mobilised will serve a truly social objective.
The funds raised are being transferred to the beneficiary Member States in the form of loans to help them cover the costs directly related to the financing of national short-time work schemes and similar measures as a response to the pandemic.