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Eurobonds to finance energy spending, EU is tempted

(Sustainabilityenvironment.com) – Eurobonds to finance expenditure on energy and defence. The European Commission would be working on this solution because of the summit of Heads of State or Government to be held in Versailles on 10 and 11 March. According to confidential sources heard by Bloomberg, the European executive’s technicians have prepared a first draft that will be discussed during the informal summit. The size of the joint issuance of debt – guaranteed by virtually all 27 Heads of State – and other details will be added according to member countries’ guidelines.

What we know about Eurobonds’ plan

How would the new Eurobonds work? According to rumors, the Commission is issuing bonds, the proceeds are raised on the markets and are channeled to the Member States in the form of subsidised loans to finance expenditure in certain areas, including energy. Great move, but it doesn’t start from scratch. One of the hypotheses being studied reveals Bloomberg, is to structure the functioning of Eurobonds by imitating the EU SURE program launched at the beginning of the pandemic in support of employment. SURE provides for countries to receive subsidised loans from the Commission.

Officially, the EU executive denies the plan. “We don’t have these plans” said Commission Vice-President Frans Timmermans yesterday. But he immediately added that he did not exclude any Member State from submitting such proposals. How to finance the new expenses, necessitated by the Russian invasion of Ukraine, will be the focus of the meeting in Versailles.

The idea of joint action at the EU level to support the energy transition and the post-pandemic rebound had been mooted in recent weeks. However, the idea has not found a favorable reception in all European capitals, and unanimity is mandatory for such a move. Among the options, we talked about a kind of Recovery bis, an intervention similar to the 1,800 billion euros of the Next Generation EU, financed by the issue of common debt. Even in size? It would seem so: Bloomberg is filtering that the issue of Eurobonds could be “potentially massive”.

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