European Commission unveils the ‘Next Generation EU’ recovery plan
On 27th May the European Commission unveiled its proposal for the ‘Next Generation EU’ recovery plan', an emergency package of €750 billion financed by long-term EU borrowing to jump-start Europe's recovery over the period 2021-2024, in particular in the countries heavily hit by the COVID pandemics. With the emergency support programme of the European Central Bank (ECB), aimed at keeping cheap credit flowing to businesses, this is the most significant response by the EU to the economic fallout of COVID-19.
With ‘Next Generation EU’, the Commission wants to give member states and businesses additional €440 billion in grants, €60 billion in guarantees and €250 billion in loans.
Together with the previous measures and safety nets for workers, businesses and sovereigns endorsed by the European Council on 23 April and amounting to a package worth €540 billion, these exceptional measures taken at the EU level would reach €1,290 billion of targeted support to Europe's recovery.
Two-thirds of the new €440 billion sum of the ‘Next Generation EU’, would be channelled via the proposed new Recovery and Resilience Facility. The rest will be scattered throughout existing EU budget programmes, as explained in this analysis by economic think-tank Bruegel.
The money from the Recovery and Resilience Facility will be allocated to member states and used for long-term investments and growth reforms for recovery and economic resilience, including in relation to the green and digital transitions. The twin digital and green transitions continue to be the EU political priorities: investments and reforms to advance them will therefore have to be included in all national Recovery and Resilience Plans.
To help companies hit by the unprecedented economic shutdown and experiencing massive liquidity difficulties, the Commission proposed a new Solvency Support Instrument aimed at mobilizing private investment by providing guarantees against company losses. The instrument will work via an EU guarantee of about €7 billion provided to the European Investment Bank Group. The Solvency Support Instrument should predominantly channel solvency support through financial market intermediaries.
It is worth mentioning that the EU recovery facility does not target any specific sector. Member states can allocate the EU funds to various economic sectors as long as they contribute to the green and digital recovery.
We at CECE strongly believe construction can play a key role in the recovery and should be considered as a priority in the allocation of the funds from the EU recovery plan for the following reasons:
- Construction needs investments for the green transition in order to achieve the target of “at least doubling the annual renovation rate of existing building stock”;
- There is high percentage of equity losses among construction companies due to the economic consequences of the COVID impact (lockdown, slowdown of the economy, social distancing on the work site);
- There are clear references to energy efficiency of buildings, renovation, social and transport infrastructure in the different programmes of the EU recovery plan.