€1.7Bn EU ‘bazooka’ funding arrives by summer

Portugal is to receive the first tranche worth €1.7Bn from a €13.2Bn ‘bazooka’ economic aid package to help kickstart the country’s economy by the start of this summer.

However, Brussels had made clear that the emergency funding, which will be spread over five years to 2026, is a loan, albeit at very attractive rates of interest, but a loan nevertheless, which will have to count towards the country’s long-term debt.
The vice-president of the European Commission, Valdis Dombrovskis, said on Tuesday that the use of the loan from the EUs Recovery and Resilience Mechanism (RRM) by Member States will have a budgetary impact on public debt, a relevant issue for countries whose level of debt in relation to GDP is high, as is the case with Portugal.
Portugal’s current rolling debt stands at €137Bn or 124% of GDP and this loan plus interest will add another €20Bn onto that total accumulated debt.
The EU vice-president said that by adding the loans to the national debt, it was hoped to “avoid creating uncertainties in the markets”.
The first issue of debt will secure the first tranche of 13% of pre-financing that Member-States will have the right to use after their recovery programmes have been approved.
The RRM is the main financial instrument of financial recovery from the European Union to tackle the crisis caused by the Covid-19 pandemic, foreseeing the distribution of €672Bn to Member-States, some made up from loans and others amounts from grants and subsidies.
Earlier this month, the Prime Minister, António Costa, said, “This is a time of economic and social emergency and Portugal will be ready with its plan within three weeks.”
The plan will be analysed by Brussels before any of the funding is approved. The overall RRM was approved on 12 February by António Costa in his capacity as the leader of the rotating European presidency, and David Sassoli, president of the European Parliament.
On Twitter, after the signing, Mr. Sassoli said, “Citizens cannot wait, businesses cannot wait, our countries cannot wait” (for this funding). “The crisis we are facing is too deep”.
In Portugal, the recovery plan has €186 million earmarked for renewable gas projects using hydrogen and bio-methane with the government banking on generating 120 megawatts (MW) of power capacity from green energy sources using these gases of renewable origin which will be promoted by the Environmental Fund.
Called the “vitamin that will get us out of the crisis” and make Portugal “more resilient, green and digital”, the government’s Plan for Recovery and Resilience has gone online for public consultation before being sent to Brussels for approval.