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By the end of April, all EU states will have to submit their National Resilience and Recovery Plans (PNRR) to access European Commission funding provided under the EU Next Generation. The totals are known and that is 672.5 billion of which 312.5 of subsidies and 360 billion of loans that will be raised on the markets with the issue of “QuasiEurobonds”. The guarantee of the emissions will be given by the European budget which, however, does not transform these EuroBonds into a durable instrument of European economic policies. The “Almost” thus specifies their “one-off” nature even if the duration of the emissions by 2026 could reach 30 years.
Three problems for the EU Next Generation
Three other problems now arise. The first concerns the non-use of loans by the EU states. The second is the switching of QuasiEuroBonds into real UnionEuroBonds similar to US Treasuries. The third is the macro-European dimension in techno-scientific sectors to reduce the dependence of the EU (or increase its sovereignty) which has emerged dramatically in the case of vaccines. The answer to these three questions does not come from the appreciable coordination of individual states required by the EU Next Generation which prescribes both sectorial constraints (green and digital transition, sustainable mobility, education and research, health and cohesion to other) and implementation time constraints for investments. by 2026. The three problems cannot be solved immediately, but to consolidate the innovation of the EU Next Generation we need to reflect from now on.
What if the loans are not used?
The first problem is therefore that the 360 billion of loans envisaged for the States are only partially requested. This choice is emerging as National Resilience and Recovery Plans are presented or announced. France and Germany do not foresee the use of loans but only subsidies, Spain has postponed the decision while Italy seems willing to access it given its mega-debt. All these choices are subject to the trend in interest rates and inflation. Since the decision can be postponed until August 2023, there is a risk that until then it will not be known what is the sum that the States will borrow.
In this uncertainty, the European Commission must look for alternative solutions because if a substantial part of the 360 billion of loans is left unused, the impact on the European economy would be considerably reduced. The possibility that the States replace the Commission’s loans with the direct collection of government bonds on the markets would not be enough because the overall innovative effect of the EU Next Generation would in any case be fragmented and therefore weakened.
Euro-Finance and the real economy: the EIF
Several times I have dealt with powerful euro-financial institutions with credentials to access the financial markets at the highest level of security. These are entities controlled in various ways by the governments of the EU, the Eurozone and the Commission. Well known are EIB (European Investment Bank), Mes (European Stability Mechanism), Efsf (European financial stability facility), Bers (European bank for reconstruction and development). Some have a long history and are actively operating, others were created for specific needs and are now underutilized. The case of the MES is now emblematic.
Among the various entities with great potential is the EIF, the European Investment Fund. Equipped with its own legal personality, it is a partnership between public and private (very important aspect) with a tripartite shareholding: the European Investment Bank has been the majority shareholder with 69.89% since 2000; the European Union, through the Commission, owns 21.55% of the shares, but in 2007 it was established that this percentage will gradually be increased to 30%; 38 European banks and financial institutions, from the members of the European Union, the United Kingdom and Turkey, own the remaining 8.56%. The Fund’s capital is € 7.37 billion, divided into 7,370 shares, 1166 of which have been created but not yet released. They will serve to bring the EU share to 30%. So control is firmly in the hands of the EIB and the European Commission.
Since it is already clear that at least 100 billion of the 360 envisaged by the Next Generation Eu as loans to the States will not be requested, the European Commission could issue UnionEuroBonds on the markets and allocate the collection to increase the capital of the EIF to transform it into Macro-Financial of European techno-scientific participation and promotion. If Fei takes on innovative long-term holdings, it will be possible to have returns on investments that will reward the subscribed capital of the Commission well. Other capital increases could be added in a public-private partnership that already characterizes the Fei that the Presidency of Dario Scannapieco has brought to a very high quality of management. The expiry renewals of the UnionEuroBonds issued by the Commission would be obvious.
One conclusion: three economic pillars of Euro-Sovereignty
The dependence of the EU on the US and China in various sectors is known, great and destined to increase. The market-making of European competition rules will be good for consumers in the short term, but exposes citizens to political and strategic variables. The case of vaccines was emblematic. The same will be the case in many other fields. The sectors in which to invest are known. It is now a question of using UnionEuroBonds as multipliers to grow the businesses and science labs that ultimately lead to socio-economic progress.
In the 21st century, Euro-Sovereignty depends economically on Euro-Finance, Euro-Technoscience and Euro-Currency. Draghi strengthened the latter. Now we trust in the President of the Commission Von der Leyen and in the European Commissioners Breton and Gentiloni who are certainly not doctrinal marketers.