(1)

In the context of the response to the COVID-19 crisis, the NextGenerationEU (‘NGEU’) recovery package was adopted to finance recovery initiatives, while facilitating the green and digital transition of the European Union economy. In this respect, NGEU programmes are those financed under Article 2(2) of Council Regulation (EU) 2020/2094 (3), in so far as they implement measures referred to in Article 1(2) of that Regulation.

(2)

Under Article 5(1) of Decision (EU, Euratom) 2020/2053, the Commission is empowered to borrow funds on capital markets on behalf of the Union up to EUR 750 000 million in 2018 prices, out of which up to EUR 360 000 million in 2018 prices may be used for providing loans and up to EUR 390 000 million in 2018 prices may be used for expenditure.

(3)

Under Article 5(2) of Decision (EU, Euratom) 2020/2053, the repayment of the principal of the funds borrowed to be used for expenditure and the related interest due is to be borne by the Union budget.

(4)

In accordance with Article 15(3) of Regulation (EU) 2021/241 and with Article 220(5), point (e), of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (4), costs related to the borrowing of funds for the loans provided under Regulation (EU) 2021/241 are to be borne by the beneficiary Member State.

(5)

With the implementation of the Commission diversified funding strategy for the implementation of NGEU borrowing operations and NGEU debt management borrowing operations, capital is no longer raised on a transaction-by-transaction basis. Under that model, costs of funding were clearly identifiable and linked to a specific borrowing transaction and the related costs could be transferred to the loan beneficiary along with the proceeds of the borrowing transaction. By contrast, with the NGEU diversified funding strategy, disbursements under NGEU are to be financed through recourse to a single funding pool, composed of short and long-term funding instruments, from which resources are drawn when disbursements need to be made to beneficiaries. The diversified funding strategy ensures the most advantageous terms when borrowing significant amounts of funds with different maturities. Consequently, a tailored approach is needed to calculate and assign the shared costs linked to each disbursement on a fair, equitable and transparent basis.

(6)

In order to ensure this fair, equitable and transparent approach, the Commission should implement a common and unified methodology for costs, applicable to both the disbursements relating to loans and to the ones relating to external assigned revenue under Article 3(1) of Regulation (EU) 2020/2094.

(7)

A new methodology for the allocation of costs that ensures that there is no cross-subsidisation of costs by one category of beneficiary by another should be used. Costs of borrowings attributed to loans should be fully imputed to Member States who benefit from loans under Regulation (EU) 2021/241. Costs of borrowings attributed to external assigned revenue under Article 3(1) of Regulation (EU) 2020/2094 shall be fully imputed to the Union budget based on actual costs incurred for raising and disbursing the respective share of proceeds to the different beneficiaries. The methodology should cover all the costs incurred by the Commission for borrowing under NGEU, including all administrative costs, and should ensure that different categories of costs be calculated for each disbursement.

(8)

This cost calculation and allocation methodology should distinguish between three categories of cost. First is the cost of funding, which derives from interest and other charges that the Commission must pay on the different instruments issued to finance the disbursements in question. Second are the costs of liquidity management that are the costs incurred as a result of amounts held temporarily on liquidity accounts as reserves to meet upcoming payments. Third are the administrative costs of building and maintaining the technical and operational capacity to implement a diversified funding strategy.

(9)

The calculation of the cost of funding that results from long-term borrowing transactions should be derived from the costs arising from all borrowing operations carried out during the six-month time period into which, as a rule, falls the date of the disbursement. The compartmentalisation into six-month periods is justified by the need to ensure that the cost of funding charged to the disbursement is closely linked to the prevailing market rates at the time at which it is made, and not based on funding costs incurred in some distant time-period. This way, the funding instruments, and the related costs, are allocated to relevant compartments. The precise pool of funding instruments is fixed only at the closure of the six-month time-compartment. This should permit the application of the same cost of funding to any simultaneous disbursement attributed to the same time-compartment and should ensure fair, equitable and transparent approach between Member States in particular. Member States and the Union budget for the external assigned revenue under Article 3(1) of Regulation (EU) 2020/2094 should pay their respective share. This avoids the arbitrariness or chance that characterised the traditional back-to-back system where the costs for any particular beneficiary were the terms that could be obtained on the particular day that the borrowing took place. Except the first time-compartment, which should cover the period from 1 June 2021 to 31 December 2021, each time compartment should cover a period of six months starting on 1 January or on 1 July. The last time compartment’s active period should end on 31 December 2026, which results in eleven time compartments. Time compartments should cease to exist once full repayment of financed disbursements is achieved.

(10)

While interest rates charged to loan beneficiaries will be stable, there will be periodic and marginal recalculation of rates when maturing instruments in the funding pool need to be replaced. The Commission will develop its capacity to use derivatives such as swaps to manage any remaining interest risk and offer the option of fixed interest rate loans to Member States. The costs of this fixed interest rate facility should be borne fully and exclusively by the Member States exercising this option.

(11)

The amounts of disbursements in a time-compartment should equal the amount of long-term funding instruments attributed to that time compartment. In most cases, the disbursements of proceeds will occur in and be attributed to the same time-compartment as the issuance of the long-term funding instruments used to raise the proceeds. However, unforeseen delays in making disbursements may result in situations where the proceeds of the long-term funding have been raised but cannot be disbursed as initially scheduled. In that case, the disbursement may be delayed and take place during the period of the following time compartment. However, if the funds for these particular funding needs have already been raised and attributed to the previous time compartment, they cannot be used for other needs in this time compartment. Under these circumstances, it should be possible to attribute the related disbursements to the time-compartment to which the funding instruments have been attributed. It should equally be possible to attribute long-term funding instruments of the following time-compartment to the previous time-compartment in case the amount of long term funding instruments of that time-compartment is not sufficient to cover the amount of disbursements.

(12)

The Commission will also need to anticipate, in the preceding time-compartment, disbursement needs arising early in the life of the next time-compartment. To cater for such situations and ensure that the Commission has the resources available on advantageous terms to make disbursements taking place close to the transition between time compartments, the Commission should have the possibility to attribute long-term funding instruments to the following time compartment.

(13)

The ability to manage liquidity of the funding operations by accessing short-term borrowing and holding cash for prudential purposes is a central and defining feature of the diversified funding strategy. This liquidity management will enable the Commission to meet all payment needs and adapt issuance to market conditions. This capacity gives rise to costs of raising proceeds through the issuance of short-term paper, and holding some proceeds on a temporary basis on a liquidity account in order to guarantee the ability to make all payments on demand. This Decision should establish a basis for calculating these liquidity costs and charging them on a fair and equitable basis to all relevant beneficiaries of proceeds over the course of the year in question.

(14)

Higher disbursement needs than the amount of long-term funding instruments allocated to the respective time compartment or interest payments, may result in a liquidity deficit of a time compartment. Lower disbursement needs than the amount of long-term funding instruments allocated to the respective time compartment or redemption payments received by NGEU in relation to the outstanding disbursements allocated to the compartment may result in a liquidity surplus. Compensating these liquidity surpluses or deficits are unavoidable requirements of the implementation of the NGEU funding strategy. These costs should not be borne by the respective time-compartments, but should be isolated and managed as part of distinct liquidity management costs. It is necessary to establish a mechanism to disentangle costs arising from liquidity deficits or surpluses so that they can be absorbed by the wider funding programme in the form of liquidity management costs. The Commission should use the liquidity management compartment to level any positive or negative cash balances in the time compartments to the total amount of disbursements.

(15)

Implementing the diversified funding strategy requires acquisition of new capacities needed to obtain the most advantageous access to capital markets and ensure the maintenance of such infrastructure in a continuous and effective manner. This includes the costs needed to maintain liquidity accounts, to acquire capacity to run auctions for EU-Bills and bonds and to implement new internal data-processing capacities. Such costs that result directly from the implementation of NGEU borrowing and disbursement operations should be treated as overheads that distinguish costs related to the set-up and to the maintenance of NGEU borrowing and payment infrastructure. These costs should be captured by the cost of service for administrative overheads.

(16)

The cost of service for administrative overheads combines all administrative costs incurred directly in the implementation of NGEU. These costs are to occur either as set-up costs, relating to one-off costs of building certain operational capacities or as recurring costs which are unavoidable costs directly attributable to NGEU operations and which occur over time.

(17)

While the recurring costs should form the main part of the regular annual costs charged to the disbursements that take place in a given year, the set-up costs should be imputed as one-off charges.

(18)

Administrative costs included in the cost of service for administrative overheads should be confined to a closed list of costs directly related to NGEU. Aggregate cost of service for administrative overheads represents a very limited share of aggregate costs from NGEU operations. The Commission would conduct appropriate consultation, including with Member State’s experts, before extending the list of administrative costs should a justified need arise in the future. Such consultation would also be undertaken prior to modification of other aspects of this methodology that will influence the costs to be borne by the Union budget or Member States.

(19)

The ex post invoicing process should be designed so as to ensure that costs are recovered starting from 2022 and until the moment costs are no longer generated by NGEU borrowing and debt management operations.

(20)

The Commission should issue a confirmation notice in respect of each disbursement, be it for external assigned revenue under Article 3(1) of Regulation (EU) 2020/2094 or for loans given to Member States under Regulation (EU) 2021/241 (‘RRF loans’).

(21)

The loans under Regulation (EU) 2021/241 are to be implemented on standard financial terms (maturity and repayment profile) for each disbursement made to Member States. For disbursements for external assigned revenue under Article 3(1) of Regulation (EU) 2020/2094, the confirmation notice should be the main supporting element determining these financial terms for the EU Budget. The confirmation notice is to determine the claim for cost on the basis of its financial terms. These terms should include the date of disbursement, the amount of financial support, the date of payments of cost of funding external assigned revenue under Article 3(1) of Regulation (EU) 2020/2094.

(22)

Appropriate references in the loan agreements signed by the Member States will clarify that the costs of disbursements are determined by the application of the methodology set forth by this Decision.

(23)

The cost allocation methodology determines the method of calculation of costs of borrowing borne by both the budget in accordance with Article 5(2), first subparagraph of Decision (EU, Euratom) 2020/2053 and by the Member States in accordance with Article 15(3) of Regulation (EU) 2021/241. Accordingly, it constitutes an arrangement for the administration of the borrowing and lending operations within the meaning of Article 5(3) of Decision (EU, Euratom) 2020/2053 and of Article 15(4) of Regulation (EU) 2021/241.

(24)

In order to ensure uniform allocation of costs under NGEU recovery package, this Decision should apply from 1 of June 2021. As this Decision should apply to borrowing transactions and disbursements under the NGEU programme that have occurred prior to its entry into force, it should enter into force on the day following that of its publication in the Official Journal of European Union. The application of this decision to loans under Regulation (EU) 2021/241 with Member States should take place upon the entry into force of the relevant loan agreements,