EU to raise US$100b in bonds this year to finance stimulus

[BRUSSELS] The European Union plans to raise around US$100 billion in long-term bonds and "tens of billions" in short-term bills this year, as the 27-nation bloc launches a landmark stimulus programme financed by jointly-backed debt.

The first syndicated bond issuance is expected later in June, the EU's executive arm said in a statement on Tuesday, while sales of the so-called "EU-Bills" will begin in September, when the bloc's auction platform becomes operational.

"Further syndicated transactions are foreseen to take place before the end of July," the European Commission said.

EU member states have agreed to allow the Commission to raise as much as 800 billion euros (S$1.29 trillion) in debt, or about 150 billion euros a year by 2026, to finance investments in green and digital policies and help pull the economy out of recession.

Some of the proceeds will be distributed to member states in the form of grants that will be repaid from the bloc's joint budget and new taxes, and the rest in the form of concessional loans with repayments extended through the end of the 2050s.

The total figure is unlikely to be reached because most member states won't make use of the loans available. Still, the stimulus fund sales will make the EU's executive arm the world's biggest issuer of social and green debt and one of the biggest sovereign issuers with a high credit rating. The Commission has already raised about 90 billion euros in debt to finance job-protection and employment programmes.

While the jointly-financed stimulus is meant to be a one-time emergency measure, several officials in Brussels and national capitals are betting on its success to convince hawkish countries including Germany, Finland and the Netherlands to agree on a more permanent instrument. They're hoping to persuade skeptics to create a safe asset denominated in euros and liquid enough to challenge US Treasuries by linking disbursements of the funds to strict conditions.

The Commission said Tuesday it will update its estimates about this year's borrowing needs in September, by which time all member states will have submitted their spending plans for the recovery funds and the first disbursements will have been approved.

BLOOMBERG