Stephanie RISO

What Stephanie RISO has said (6)

• “Thank you very much chair good afternoon to all. Maybe I go quickly on this first slide that I wanted to show you on the borrowing. It's because Maite just presented them in extensor so just a couple of elements to frame a bit the discussion. So we had a number of disbursements in twenty twenty five I think related to payments in the context of the ARRf. You have here the numbers for both grants and loans and we expect still sizable disbursement by the end of the year. So in the last three months of twenty twenty five dollars eighteen point six billion in grants and sixteen billion dollars in loans. In twenty twenty six we do expect very sizable disbursements and I want to relate to what Mahite said. We know that there is this concentration of payments in the last year expected for twenty twenty six. If there would be no de commitments we would basically have to disburse NOK two sixty two billion in twenty twenty six for the ARRf. Again this is the estimate full one hundred percent implementation. Mehdi already indicated that for some plans the Czech plan, the Romanian plan there will be some revision. So once this is agreed at the revisions of course we will adapt those numbers. But I want to raise your attention to another point which is the fact that today the EU is not only borrowing for Next Generation EU it also borrows for other programs. You know Safe Ukraine, Western Balkans, any macro financial assistance and of course we roll over part of the debt. As we will start reimbursing NextGen as of twenty twenty eight all this is also significant in terms of needs. If you look at twenty twenty six you will see that we have about sixty five billion dollars in borrowing needs outside of Next Generation EU. Why am I saying this? I'm saying this because obviously if we have to plan those disbursements coming in twenty twenty six in numbers that are extremely high already now as you know today in twenty twenty five we have a funding plan of one hundred and sixty billion of long term bonds and this is the maximum this is the highest that we have ever raised in one year. So if we were to do you know about the same in twenty twenty six you see that we will not be able to actually cover on it. Of course long term funding is not the only tool we use. We also use short term funding, we also use you know cash placement, we also use repo facilities so we have other tools. But definitely the fact that we have these numbers in front of us in twenty twenty six have called for us to start building some capacity already in twenty twenty five to pay for twenty twenty six. I'm insisting on this point for one reason which is that before this year up until twenty twenty four we have inverted interest rates curve. So it meant that we were borrowing long term cheaper than we were placing short term and that meant that we were actually making interests on the liquidity we hold to face disbursement. But in twenty twenty five we are back to normal in macroeconomic terms and therefore it is costing us to hold this liquidity. But this liquidity we have to hold for two main reasons. The first one is that as we know because the disbursements are based on the assessments of the compliance with milestone and targets and there are some discussions it is not predictable very precisely in a sense and so we have some delays we have some postponements. And we have also two phenomenon that we have now also observed in the past years which is a concentration of disbursements in the end of the year December January and a concentration of disbursement in July and August. And from a funding perspective this is no good. Why? Because July and August the markets are closed the liquidity is very rare and if we had to actually raise the amounts that we're talking about in July and August we would be facing worse financial conditions simply. And I'm hearing I'm having here the example of this summer where we had to disperse about eighty billion in July and August altogether and not only in NextGen but altogether. If we had to raise this amount in July and August it would have been quite a disaster to be honest. No one does that across the world and so we had to build this liquidity ahead of these disbursements and we reached the peak in terms of liquidity balances in July with almost one hundred and ten billion. But as I just said this cost money because we have to pay interest rates on this money and because of the change in the interest rate environment for the first time in twenty twenty five we will have a cost on this liquidity holding about three fifty million dollars in twenty twenty five which is budgeted for twenty twenty six. We will discuss this in consolidation starting in the coming weeks and as I mentioned before that up until twenty twenty four we were making an income so this has not been difficult but now it's turning and this will of course be still the case in twenty twenty six and then as we are approaching twenty twenty six this reduces this cost because after twenty twenty six there is no further payment and therefore no need to actually build up this liquidity. I just wanted to attract your attention to those two points. Now legal framework for repayment as you know this is enshrined in the own resources decision the current one the one that exists and that states a number of principles. A the repayment of the principal and of the related interest shall be borne by the union budget. B we need to ensure a steady and predictable reduction of liabilities. C we need not to have annual principal repayment below seven point five percent of the total non repayable support in current prices. This is about billion. D no net borrowing as of the end of twenty twenty six so we need to raise the entire funding needed by before and no outstanding debt after two thousand and fifty eight. So that means that we will start reimbursing NextGen EU as of the next MFF starting in twenty eight and we have to finish it up by two thousand and fifty eight. So what we have been proposing in order to deliver on this legal framework in the context of the next MFF is to have a fixed amount per year every year between twenty twenty eight and twenty fifty eight that will be made up of two elements. One is the interest cost and the other one is the principal. So because we have been and the chairman Amholmeier was recalling this we've been experimented in the last year's difficulties in managing the interest cost which is by definition volatile in the framework of our budget which is not so flexible when it comes to changes in terms of estimates of amounts needed and it led us to agree on the URIC cascade you mentioned that Madam Holmeyer in February twenty four to catch up for that but it is painful and it is not a good system because it leads to a lot of unpredictability and it actually eats up all the margins and the flexibilities that we still have in this budget for twenty twenty six and twenty twenty seven instead of being able collectively to reinforce our different programs. So we want to do a different system for the new MFF and we're proposing a fixed amount twenty four billion per year in current prices for both interest cost and capital repayment. What does that mean? It means that if the interest costs are lower than anticipated we will increase the repayment of principal and if the interest costs are higher than anticipated we will decrease the level of principal repayment always having this NOK24 billion in current prices on an annual basis. And you can see I hope you can see in the graph here the is it dark blue I think it is dark blue part of each bar which is the capital repayment and what you see is that the capital repayments are increasing over the years in order to actually at the end of twenty twenty six finish up the repayment of the principal. So with this system in place if and this is a big if if it's accepted like this twenty eight twenty thirty four and if it is continued after this next MFF in the same magnitude then we will actually reimburse the full of Next Gen EU debt by two thousand fifty eight as required by the legal framework. So this proposal we think is good because it is predictable it is stable it won't impact the rest of the budget and it ensures the repayment of the full NextGen EU debt by the deadline as prescribed by the legal framework. And just for you maybe to remember that these contingent liabilities this repayment that we need to do until two thousand and fifty eight is back up by a specific compartment if I may say like this in the headroom in the EU budget this zero point six percent of EU GNI which is sort of set aside in order to face any default on this contingent liabilities. Voila I think I can keep it there madam chair yeah”
  Own EU resources · Size of EU budget · EU fiscal rules and oversight of national budgets
• “Thank you so what indeed what happens in case not the full envelope of the RF is used and actually this is not on the RF it's the entire NextGen U envelope of course the proportion are as they are. So what happens first if we know this in advance so imagine now and Mit was mentioning the Czech Republic and Romania but by the end of the year the plan is to have say all the revisions of the different member states by then we will then know you know whether some member states are deciding not to use the full envelope. That means that we will adapt of course our funding plan to this new reality so reducing it that's one thing. So the first answer is if we know that the envelope are not going to be used entirely then we don't raise the money in capital market and it decreases basically the stock of outstanding debt and it will indeed in this twenty four billion repayment change the proportion between interest rates and principal repayment that's correct. But I mean we will have to see what we're talking about in terms of amounts if it is I don't know I don't want to speculate but obviously you see that depending on the size of the decommitments it has an impact plus or minus important or large on the repayment indeed that's one. Now there is the second case in which the member states still have the plan to use up their full envelope or whatever amounts they have fixed and then we come to the end of the execution and it's not paid because milestone or whatever are not are not are not met. What happened if we have raised the money then we will use up this money to start immediately repaying the debt. So this money will then be used to accelerate the repayment of the debt and indeed it will affect again you're correct the proportion between repayments of the principal and payments on the interest rate so it will be affected. And I think it is your question is extremely relevant and I hope it illustrates the benefit of using a fixed amount with a viable proportion between interest and capital because it allows us to actually cater for any situation that we won't know before it actually materialize and we will be protecting the rest of the EU budget by having this fixed amount.”
  Own EU resources · Size of EU budget · Conditions to access EU budget
• “I think it was a comments norm not not really a a question and so of course I I agree with you that it's important to explain. I think two just two maybe just even one factual comment on the different size of the MFF and the fact that because we paid back we have to pay back Next Gen we have we take away other fundings for other programs. The way we're constructing the proposal preserves in fact the financial capacity of the MFF and actually slightly increase it because so if we look at the proposal this is about one point two six percent of G and I zero point one one percent of that is indeed for Next Generation EU repayment and it's NOK one hundred and sixty eight billion over the period significant no one challenged that. So this is zero point one one percent of GNI which means that there is one point one five percent which is available for say policies and investments and if you compare it to what was agreed back in twenty thirteen it was one point one three percent at the time at the time GNI which because we have this automatic deflator of two percent across the year for the budget and because inflation has been much higher than this two percent has in fact today reduced the MFF to about one percent of GNI. So if we are agreeing on the size or around the size that the Commission is proposing we would still have a higher financial capacity with the EU budget than today I think just to say that that's maybe hopefully an important message also in trying to explain what the EU is doing but we took good note yeah.”
  Own EU resources · Size of EU budget · Conditions to access EU budget
• “Can I can I speak French madam? Yes okay for me no problem at all. As you will be aware I mean as everybody here knows full well there is an issue when it comes to the transparency surrounding final beneficiaries for the recovery and resilience facility. That is one of the reasons I dare say which has made it possible for us working with the European Parliament in the revision of the financial regulation to demand that as of twenty twenty eight all final beneficiaries regardless of what kind of instrument you're talking about and what mode of European budget we're talking about direct indirect or shared management will be published. And the rule henceforth will be that we shall be able to identify the financial beneficiaries of any form of European funding and I think that that is a massive leap forward basing ourselves on a rule whereby when we gather information that information should be published obviously making sure that data protection rules are applied. So as of the next MFF because we've got a financial regulation already it exists it doesn't need to be renegotiated but it does call for increased transparency so we're already working on that and all the kind of it tools that we need to make that possible going forward so research and publication tools will facilitate that transparency and by extension the legitimacy of the budget. Now on the cascade mechanism and Miss Holmeyer reminded us of this it's important I think to bear in mind the circumstances in which Next Generation EU was agreed it was an emergency mechanism it was a mechanism for the first time that made it possible for us to support countries which found themselves in the most acute economic crisis they had ever experienced as countries. And the Commission along with the Parliament therefore proposed that we should have a special instrument to cover interest repayments outside the MFF repayments because by their very nature they are a volatile spending item and they should not therefore by definition be part of an agreed spending cap under the MFF. And that is why that was agreed for a seven year period. Now obviously at times you will make mistakes because it's very difficult of course to forecast future interest rates and you know we fell into that trap and we did make a mistake and everything we had set aside for those repayments was not sufficient to cover those interest repayments. And there was a big risk that the we would then have to eat into other EU programs to try and free up resources to be able to make our interest repayments and that of course over time is not acceptable. So you know there's been very bitter disagreements discussions negotiations on the cascade mechanism I mean it's not something that any of us would want but of course the EP Commission all of us came together not so much to defend a mechanism which would bust that ceiling but I do think that it has the merit of protecting as far as possible I mean not to the extent we would have wished the other programs which means that in twenty twenty five things ran very smoothly indeed and we didn't have to dip into budgetary envelopes for other programs. And in the proposed budget for twenty twenty six which the Commission will very soon be discussing with Parliament and Council once again will be ring fencing protecting those other programs and on the basis of the information that I have today I would venture that that will also be possible for twenty twenty seven and so that is why we have decided that we wish to preserve that instrument and we are in agreement with the Parliament on that.”
  Financial regulation · Transparency requirements of EU institutions · Size of EU budget
• “If I if I answer something you just tell me so if I understand correctly it's you know how do we perceive the need to actually reimburse NextGen EU as of the start of the next MFF in the face of larger needs for investments you mentioned defense and how does that relate to proposal or the question on the new own resources and so raising additional revenues from the member states and paying back this debt. I think the relationship has always been there since we've discussed Next Generation EU and the capacity as a one off exceptional capacity for the EU to raise this money in the capital markets. The issue always was there on how we reimburse it and the link to the new owned resources and additional new owned resources compared to today was there as one element and an essential element for us to be able to reimburse this debt in the next decade. In the proposal we've made for the next MFF we have proposed to raise new own resources for an amount which is actually even larger than the pure reimbursement of NexGen because in terms of current prices the new own resources will raise about sixty five billion. You've seen here that we're proposing to reimburse twenty four billion dollars per year the rest is our call for increasing our financial capacity in Europe to basically increase the financial capacity of other programs. So the two elements the fact that we can raise debt and the fact that we will have to reimburse that including and primarily pardon through new and resources was taught by design at the very beginning of the plan was that your question sir yes very good if.”
  Own EU resources · Size of EU budget · EU fiscal rules and oversight of national budgets
• “It's a very good question because you know it depends on where you actually sit in that in that at that moment. So for us the bulk of the borrowing would have been done by the end of twenty twenty six because we as we just said there is no net new issuance after twenty twenty six so we need to raise all the money we need up until twenty twenty six then we roll over part of the date so the debt that we are not reimbursing as of twenty eight we roll over. So the financing conditions in a way are less impactful than they are today because today we are locking ourselves in different interest rates we will roll over and it will depend on the rollover but we are most exposed right now up until twenty twenty six to interest rate development after twenty eight after twenty six sorry as of twenty seven less so because we don't raise new funding at least when it comes to Next Gen EU in this context of course where we still continue to roll over the debt and so from that pure I would say a financial budget perspective I will tell you I prefer that the long term interest rates are low but as an economist I will say that if the interest rates long term interest rates are low it is probably the sign of a weak economy. So altogether well that's my personal view as the commission it's my personal view as an economist would be to say I think it is better to have the interest rate curve we have and it is better to have long term interest rates which are not zero as we were in the past that are higher because it is somehow that someone believes that Europe has some strength and future competitiveness embedded. So I am more in favor of not high but nonzero long term interest rates because that's it's a sign of good health for our economy.”
  Own EU resources · Size of EU budget · EU fiscal rules and oversight of national budgets