EU joint borrowing plan is a success, blueprint for more - Gentiloni

By Jan Strupczewski

BRUSSELS, April 9 (Reuters) - The European Union's post-pandemic joint borrowing plan is proving to be a success and should serve as a blueprint for future schemes that could include a European safe asset and a fiscal capacity, Economic Commissioner Paolo Gentiloni said.

Speaking at a conference on the effectiveness of the plan, called the Recovery and Resilience Facility (RRF), Gentiloni noted it will expire in 2026, but Europe will still need some 650 billion euros ($706.23 billion) in financing every year until 2030 to move away from fossil fuels and make its economy more digital.

WHY IT IS IMPORTANT

Financial markets are keen to see more of EU joint debt and are strongly in favour of creating a European safe asset -- a debt instrument that would most likely require the creating of a European fiscal capacity with the ability to borrow.

QUOTE

"The RRF will help to fill that investment gap, at least until its expiry in 2026. But, of course, our investment needs do not end in 2026," Gentiloni said, noting the EU had new priorities including defence or the reconstruction of Ukraine.

"The design of the RRF can serve as a useful blueprint for the future. The EU would benefit hugely from a permanent safe asset commensurate with the size of its economy," he said.

"Our end-goal should be the establishment of an EU-wide central fiscal capacity. This is crucial to provide European public goods – in areas such as energy, innovation or defence," he said. "The time to start this discussion is now."

CONTEXT

Ideas of creating a central fiscal capacity for the European Union, which would be a counterbalance for the single monetary policy of the European Central Bank and allow borrowing on the markets, have been around since the 1970s.

The ECB, the International Monetary Fund and the OECD have all argued a fiscal capacity for the EU would make good economic sense, but it lacks the support of key EU governments which want to retain national control over budget policy and borrowing. ($1 = 0.9204 euros) (Reporting by Jan Strupczewski; Editing by Devika Syamnath)