13 November 2020

Bruegel: Next Generation EU payments across countries and years

How much cake does everyone actually get and at what speed? This blogpost estimates the yearly Next Generation EU (NGEU) payments to each EU country at current prices in euros and as a share of GNI.

The Special European Council of July 2020 defined the total amount of Next Generation EU (NGEU) commitments at 2018 prices. Existing estimates, including my earlier ones, allocated these 2018 price amounts across countries, or reported the yearly breakdown of the total, but did not include the yearly breakdown per country in current prices in euros. This blogpost fills this gap by estimating the euro amounts of NGEU payments to each EU country in each year between 2021 and 2026. I also report these payment estimates as a share of yearly gross national income (GNI).

Payments will be made in current prices in euros (or for simplicity actual euros) not in a hypothetical 2018 prices in euros. The 2018 price amounts are hypothetical because in EU budgetary practice, a 2% annual rate of inflation is used to translate 2018 prices in euros to actual prices in euros, irrespective of actual inflation. For example, using this 2% annual inflation conversion, 100 euros at 2018 prices is equivalent to 106 actual euros in 2021 and 117 actual euros in 2026, which are the first and last year respectively when NGEU payments will be made.

In my calculations, I find that for the EU as a whole the amount of €390 billion in 2018 prices decided by the European Council for grants and guarantees will lead to €420 billion in actual euro payments. This also implies that EU borrowing will amount to €420 billion and not the 2018 price value of €390 billion (provided that all payments will be made which we cannot take for granted, see here).

In addition to the aggregate of grants and guarantees, I report calculations for NGEU loans. We do not know which countries will apply for loans: I assume that those 17 countries that borrowed from the EU’s employment-support loan facility SURE (temporary Support to mitigate Unemployment Risks in an Emergency) will also borrow from NGEU. I also assume that these countries will borrow the maximum available amount, 6.8% of GNI.

This blogpost also updates my earlier calculations for the total (at 2018 prices) cross-country allocations, resolving an important ambiguity in the European Council conclusions thanks to a recent Commission estimate (see the details at the end of this post).....

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