Mobilising EU budget in support of stability, convergence and cohesion in the euro area and the EU as a whole
For the next long-term EU budget 2021-2027, the Commission proposed today to create a Reform Support Programme and a European Investment Stabilisation Function.
Both proposals are part of the broader agenda to deepen Europe’s Economic and Monetary Union and make use of the EU budget to strengthen the performance and resilience of our interdependent economies.
The proposals combine the key principles of solidarity and responsibility at all levels and deliver on the commitments made by President Juncker in his 2017 State of the Union Address. They also build on the vision set out in the Five Presidents’ Report of June 2015, the reflection paper of May 2017 and the Commission’s roadmap for deepening Europe’s Economic and Monetary Union from last December with three principles at its core: unity, efficiency and democratic accountability. Today’s proposals will firmly anchor the euro area into the Union’s long-term budget.
The Reform Support Programme will support priority reforms in all EU Member States, with an overall budget of €25 billion. It comprises three elements: a Reform Delivery Tool, to provide financial support for reforms; a Technical Support Instrument, to offer and share technical expertise; and a Convergence Facility, to help Member States on their way to joining the euro.
The Reform Delivery Tool will provide budget support for key reforms identified in the context of the European Semester, with €22 billion available to all Member States.
The aim of the Technical Support Instrument is to help Member States design and implement reforms and to improve their administrative capacity. This builds on the experience of the Structural Reform Support Programme which has supported over 440 reform projects in 24 Member States in recent years. The tool is available to all Member States and has a budget of €0.84 billion.
The Convergence Facility of €2.16 billion will provide dedicated financial and technical support to Member States having made demonstrable steps towards joining the euro. This Facility does not alter the criteria in place for accession to the euro but it will provide practical support to ensure a successful transition towards, and participation into, the euro for those Member States wishing to join.
The European Investment Stabilisation Function will help stabilise public investment levels and facilitate rapid economic recovery in cases of significant economic shocks in Member States of the euro area and those participating in the European Exchange Rate Mechanism (ERM II). This Function will complement the role of existing national automatic stabilisers. Subject to strict criteria of sound macroeconomic and fiscal policies, loans of up to €30 billion can be rapidly mobilised, together with an interest rate subsidy to cover their cost.
This Function will also include a grant component to cover the full costs of the interest. A new Stabilisation Support Fund will be set up in order to collect contributions from Member States equivalent to a share of their monetary income from the assets they hold in exchange of the banknotes they supply (commonly known as “seigniorage”). The revenues of this Fund will be assigned to the EU budget to provide the interest rate subsidies to the eligible Member States. Such an interest rate subsidy is important to make the instrument financially meaningful.
Compliments of the European Commission