Next Generation EU

Next Generation EU (NGEU) is a European Commission economic recovery package to support the EU member states to recover from the COVID-19 pandemic, in particular those that have been particularly hard hit. It is sometimes styled NextGenerationEU and Next Gen EU, and also called the European Union Recovery Instrument. Agreed in principle by the European Council on 21 July 2020 and adopted on 14 December 2020, the instrument is worth €750 billion roughly equally split between grants and loans. NGEU will operate from 2021 to 2026, and will be tied to the regular 2021–2027 budget of the EU's Multiannual Financial Framework (MFF). Money borrowed by the EU to fund the grants will be repaid using EU's own resources until 2058. The comprehensive NGEU and MFF packages are projected to reach €1824.3 billion, so NGEU effectively doubles the EU budget while operational. It is a revolutionary EU instrument in many aspects: size (the largest EU fund so far), leverage of the grants for reforms, and novel methods of financing and grant allocation.

The program is very large (just the grant portion of NGEU is twice the amount the Marshall plan aid) and redistributive (NGEU favors the south of the block: Italy and Spain get the largest shares, while Greece is the leader in per-capita allocations, at almost 20% of its GDP). The grant portion of NGEU is approximately 3% of EU's GDP. Similar to the Marshall plan, NGEU is conditional, however it targets investment and public services, not stabilizing the budgets and promoting trade. 37% of the funds are intended for the green transition and additional 20% for digital economy.

Europe was struck by its initial wave of the COVID-19 pandemic in March 2020. The first-hit and the hardest-hit country in the EU was Italy, which promptly placed its contaminated zones in lockdown, putting health concerns over financial ones. Gradually, the other member states encountered the first wave of the pandemic; and by 17 March 2020, all member states had reported cases of COVID-19.^{[unreliable source?]} The rapidity of response depended on the country: most member states were initially hesitant, not wanting to close everything or impose a nationwide lockdown, fearing that that would cripple the economy; but two weeks after the first confirmed cases, most countries had secured their borders and imposed travel restrictions. The propagation of the COVID-19 virus across Europe plunged the continent into a deep economic crisis, and national economies were struggling due to the widespread lockdowns. From mid-March 2020, all member states saw their national debt and public spending rise, mainly due to increasing expenditures on healthcare and measures to cope with the economic crisis. In general, most member states adopted similar measures to address the economic crisis, by providing substantial aid packages to businesses and enterprises.

Gradually, EU institutions agreed to adopt further measures to tackle the economic crisis and help the member states. In mid-March, Christine Lagarde, President of the European Central Bank (ECB), adopted the Pandemic Emergency Purchase Program (PEPP), a temporary purchase program of €750 billion to deal with the pandemic emergency. The ECB's Governing Council established that the purchases were to be made to the extent they were "necessary and proportionate" to achieve the "objectives of the mandate". On 4 June 2020, the ECB decided to extend this program and added €600 billion to it, for a total of €1350 billion. On 19 March 2020, the European Commission adopted a temporary framework that allowed member states flexibility to support their national economies with state recovery packages, followed two days later by the ECB's Governing Council's agreeing to more flexible fiscal rules "by initiating the general escape clause of the stability and growth pact". On 15 May, the European Stability Mechanism (ESM) also stepped in and created the "pandemic crisis support".

After a while, it became clear that the different measures implemented were not enough to fight the economic crisis caused by the pandemic; debates on how to deal with the situation led to a confrontation between northern and southern member states. Italian Prime Minister Giuseppe Conte, backed by Spanish Prime Minister Pedro Sanchez, proposed corona bonds as a measure to recover from the crisis, consisting of the creation of joint public debt at the union level, and thus establish a solidarity mechanism for the redistribution of debt between the states. This measure was endorsed by 7 other member states: France, Belgium, Greece, Portugal, Ireland, Slovenia, and Luxembourg. However, the Frugal Four (Austria, Sweden, the Netherlands, and Denmark) led by Germany refused this proposition, scared that they would have to repay the debt in case of default. The leap forward was made by the Franco-German axis, when on 18 May 2020 they came up with a proposed aid package of €500 billion in grants, which would give liquidity to the member states affected by the crisis. This "Recovery Fund" package would be established by the European Commission, which would borrow the money from financial markets, incorporate it into the EU budget, and distribute it to the member states. On 27 May 2020, the Commission presented the "Next Generation EU" plan, a proposal worth €750 billion, a middle ground between the €1000 billion asked by the most hit countries, such as Italy and Spain, and the €500 billion proposed by France and Germany. This huge recovery fund would be integrated into the EU budget which would total €1.85 trillion.

Regardless of the first failed attempt, at the European Council meeting on 17 July 2020, an agreement upon the recovery package and the MFF 2021–2027 was reached. Nevertheless, some issues, addressed in the upcoming Council meetings, were still present. In the first place, the Frugal Four wanted to reduce the amount of grants and asked for stronger conditionality for the expenditure of the funds. Furthermore, there were concerns about which programs to fund: the Frugal Four wanted more funds for R&D, Digital Economy, and green investments, while the Friends of Cohesion (Southern and Eastern European member states) wanted the allocation to Cohesion Funds to be the same. Lastly, there were problems linked to the "rule of law" conditionality. Finally, on 10 November 2020, the European Parliament and the Council reached a definitive agreement which integrates the 2021–27 MFF of €1074.3 billion and the temporary instrument for recovery of Next Generation EU of €750 billion. The deadline for the presentation of national plans was 30 April 2021. Even though proposals were already sent to the commission in mid-October 2020, those proposals will help the Commission understand in which direction the member states are going and eventually re-orient and assist the national governments with modifications.

The Next Generation EU (NGEU) – €360 billion in loans and €390 billion in grants – is a break from the austerity policy adopted after the 2008 financial crisis as the EU's main response to economic crises. The NGEU, adopted in conjunction with the 2021–2027 Multiannual Financial Framework (MFF), demonstrates that the EU member states can collectively agree on policy, along with funding, to tackle large-scale crises.

The EU launched the COVID-19 recovery plan with several objectives. The primary objective is to help its member states repair the immediate economic and social damages caused by the coronavirus pandemic, and, additionally, to prepare a better future for the next European generation.