Borrowing: a new resource for the European Union in the period of COVID-19 epidemic

Abstract

After more than two years of difficult negotiations, marked by a withdrawal of the United Kingdom from the European Union and an eruption of the COVID-19 health crisis, the European Union has succeeded in adopting a multiannual financial framework for the years 2021–2027. The agreement reached at the European Council of 17 and 21 July 2020 constitutes a turning point in the construction of the European Union insofar as it transforms the multiannual financial framework into an instrument of a macroeconomic stabilization by backing it with a new recovery instrument called “Next Generation EU”. This change is linked to a new EU’s own resources decision for 2020, which establishes borrowing as a temporary resource for the European Union. Recourse to borrowing is strictly limited. However, for member states, recourse to borrowing could be a factor in accelerating the creation of other own resources in order to avoid using member states’ budgets (in a complementary manner) to repay the loan.