Keynote speech by Commissioner Hahn at the “The Global Borrowers and Bond Investors Forum”

(Source: European Commission)

“Check against delivery”

Ladies and Gentlemen,

Investing in Europe is investing in the future – and I am delighted to be with you today to discuss why this is in our common interest.

While the pandemic prevented us from seeing each other last year, Europe stood up to the challenge like an investor: we turned the crisis into an opportunity by becoming fit for the future.

It allowed us to respond at an unprecedented speed to the Covid-crisis – as it helps us now facing the war in Ukraine. European unity enables us to act: to help Ukraine, to support the neighbourhood, to become independent of Russian oil and gas, to boost our economy and to stabilise the global food and security conditions.

Our common power materialised in a forward-looking stimulus package of more than 2 trillion euro – leveraging national efforts. It is also an excellent example of Europe as a learning Union, drawing lessons from all previous crises.

This paid off: while it took eight years to recover from the previous financial crisis, the EU economy was rebounding already last year from the pandemic recession – faster than expected.

Key for this success was and is the temporary recovery instrument NextGenerationEU under which the Commission has been empowered to borrow up to 800 billion euro to support Member State’s economies, boosting the long-term budget in an unprecedented way. It pays – as the name says – a tribute to the future and thereby fulfils the standards, which Warren Buffet once defined as: “Investing is laying out money now – to get more money back in the future.”

I would like to use this opportunity to illustrate the importance of NextGenerationEU not only for the European recovery but also for the investors:

  1. First of all, it is a sound and solid bond,
  2. In addition, with the NGEU Green Bonds, NGEU offers new investment opportunities in sustainable finance.
  3. As consequence, it is also an invigorating pillar for the European Capital Markets

Wise investing and wise spending go hand in hand: NGEU does not only provide the required fiscal stimulus across EU Member States, but it also strengthens the EU’s green and digital transition. We are thus sowing the seeds today, so we can harvest growth, jobs and prosperity tomorrow.

Almost 40% of the spending is allocated to climate measures and this investment will pay manifold returns:

  • The Green Deal serves as Europe’s growth strategy. Meeting the 2030 climate and energy targets can add 1% of GDP and create almost 1 million new green jobs.
  • This will strengthen Europe’s role as an avant-garde for new green technologies, setting global standards.
  • At the same time, the recovery and resilience plans use the innovative power of transition to achieve geostrategic goals. For example, energy efficiency and clean power projects – key to securing European independence from Russian fossil fuels in the long run – will receive respective investments in excess of €64.4 billion and €26.7 billion under the existing approved plans.

For us, credibility is key. Therefore, the European Commission together with the Member States defined Recovery and Resilience Plans with concrete targets to ensure every euro is invested in line with our goals: Only fulfilment of agreed milestones will unlock payment. All of this contributes to a more resilient, green and digital Europe and thus to an increasingly attractive environment for investments.

In my meetings with investors around the world, I am always pleased to hear the praise for NGEU, which is also underlined by our excellent credit rating. Although we are facing global economic turbulences and geostrategic insecurities, we are on track to deliver on our commitments. Since we started our funding operation a year ago, the Commission has issued 113.5 billion euros in long-term funding. We are also implementing a short-term issuance programme, with a regular presence in the market of 3 and 6 months bills.

Despite the more challenging markets conditions and increasing yields we have been delivering successfully on our issuance plan providing the required funding to the EU Member States to build up Europe’s resilience.

This is proof of our now established presence in the market as a highly rated issuer and of our ability to raise funds in comparable terms to some of the smaller triple A euro sovereign issuers.

Under our upcoming funding plan for the second half of 2022, which will be published in the coming days, we will provide to the market guidance on our expected NGEU issuances as well as a comprehensive overview of the total funding needs, included expected issuances for our Macro Financial Assistance and SURE programmes. As we have done up to now, we remain committed to a transparent and regular communication to the market, a key pillar of our credibility as an issuer.

NextGenerationEU’s aim is not just to build resilience. It is also to drive positive change and serve as an example for others.

This is at the heart of our decision to raise 30% of NGEU funds via green bonds. Our green bond programme of up to 250 billion Euro, the European Commission is on track to be the world’s largest green bond issuer.

So far, we have raised 23 billion euros in Green Bonds – and during our conference today we are issuing the next tranche: All the transactions to date have been met by strong investor demand: Already the first transaction in October 2021 was the largest green bond transaction to date, in which the EU issued 12 billion euro in green bonds, and attracted over 135 billion euro in demand. With these transactions, the Commission is on course to reach its ambition of 30% of green bond issuance under the NGEU programme.

This allows the Commission to issue green bonds and finance the European green transitions at favourable interest rates. Examples of climate-related reforms and investments that will be financed via NGEU green bonds include the digitalisation of car factories in Germany and the construction of wind power plants in Lithuania. All investments fulfil the well-established standards of the market – the International Capital Market Association green bond principles.

By bringing such a sizeable green and safe asset to the market, the Commission aims to:

  • Provide access to the green bond market to a wide range of investors.
  • Serve as an inspiration to other issuers
  • Allow investors to diversify their portfolios of green investments with a highly rated liquid asset, thereby supporting a virtuous circle of sustainable investments.

The scale and underlying fundamentals of Next Generation EU mean that it is not just financing Europe’s resilience but it is also providing an invigorating pillar for the European Capital Markets. The figures speak for themselves: NGEU investments have attracted to date more than 1000 investors from 70 different countries.

EU bonds have been supporting the pool of euro denominated assets. In 2021 EU bonds accounted for almost 13% of the total double and triple A euro-denominated issuances (more than three times that of 2020) increasing investor’s diversification opportunities and contributing to the stability of the EU financial system.

As a consequence, NextGenerationEU will give more options for portfolio risk management, benefitting all investors and boosting the international role of the euro.

These benefits are not NGEU’s primary objective – but remain significant positive consequences of the increased EU presence in international debt capital markets.

NextGenerationEU is a win-win for investors and Europeans. Its impact is now even more important – as the war against Ukraine and its geostrategic percussions lead to global insecurities.

In this context, NextGeneration helps Europe to strengthen its resilience and its economic fundament. The investments we make today will make us more independent tomorrow.

As a European Union, we also contribute a lot to stabilising the situation in Ukraine. From the beginning on, we stand with the Ukrainian people and we proved that by arranging swiftly the disbursement of 1.2 billion euro emergency loan via the European Financial Stability Mechanism and Macro-Financial Assistance.

Of course, Ukraine will remain at the centre of attention. We want to top up the significant short-term relief provided until now. Therefore, the Commission is currently considering to propose to give up to 9 billion euro of MFA loans to Ukraine.

We have a strategic interest in leading the reconstruction efforts – combining investment with reforms. This will bring stability and certainty needed to make Ukraine an attractive destination for foreign investment and eventually, it will pave the way for Ukraine’s future inside the European Union.

We are aware that protecting our liberty and our values comes at a price. Europe Russia’s attack on Ukraine has altered economic prospects in the EU via several channels such as higher energy and commodity prices, lower trade, and higher geopolitical uncertainty. All in all, this will translate into an outlook characterised by higher inflation and lower growth compared to what we expected before the invasion.

As a Union, we are prepared – and NextGenerationEU is part of our strategy to counter global uncertainty. The success of NGEU to date – both in terms of market performance and in terms of support to policy delivery on the ground – makes us optimistic about the future despite the challenging climate and new developments ahead.

And I am convinced that our flexible funding approach will enable the Commission to continue its funding programme in a cost-effective manner.

At the same time, the money we raise will contribute to our overall goal: strengthening Europe’s geostrategic and geo-economic sovereignty and thus contributing to global stability and growth.

Our Union stands in for our European promise of peace and prosperity. Relying on our unity, we will even turn headwinds to our advantage. The European Union proved times and again that it is a learning union – living up to what Winston Churchill once said: “Kites rise against the wind, not with it.”

Therefore, funding Europe’s economic transition is an excellent return on investment. It pays off for all of us.

Many thanks for investing in Europe and in the future!

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