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The financial assistance to the member states from the EU institutions is, generally, organised under a single funding method that enhances the use of EU-wide budget, the liquidity of Union’ bonds and the attractiveness and cost-effectiveness of the EU issuance’s facilities. The European Commission has been placing its borrowing on capital markets using a unified funding approach since January 2023.
Background
The Commission shall implement a diversified funding strategy comprising the borrowings authorised under Council Decision from 2020 (nr. 2053, art. 5,1); these borrowing and debt management operations are aimed at funding programs of financial assistance. The diversified funding strategy shall be implemented through all necessary transactions aiming at a regular capital market presence, and shall be based on pooling of funding instruments to make use of common EU-wide liquidity pool.
The Commission is establishing the necessary arrangements for the implementation of the diversified European integration funding strategy; it is regularly and comprehensively informing the European Parliament and the Council about all aspects of its borrowing and debt management strategy.
More on borrowing on capital markets, in: https://www.integrin.dk/2026/02/13/new-european-syndicated-loan-the-eu-bonds-borrowing/
The European Commission is empowered by the EU Treaties to borrow from the international capital markets on behalf of the European Union. It is a well-established name in debt securities markets, with a strong track record of successful bond issuances over the past 40 years. All EU-Bond issuances executed by the European Commission are denominated exclusively in euro.
The European Commission uses the proceeds of EU-Bond issuance to fund EU policy programs. The landmark policy programs currently funded by EU-Bonds include the NextGenerationEU recovery instrument, financial support programs to Ukraine and other neighborhood countries, as well as the EU’s new Security Action for Europe – SAFE – instrument, helping the EU member states to carry out urgent defense investments through common procurement.
EU funding facilities
Financing common and individual EU programs of financial assistance through separate funding methods creates cost and complexity as different programs of financial assistance compete for a limited number of funding opportunities. It fragments the supply of the Union’s debt securities and reduces liquidity and investors’ interest in the separate programs, even though all Union debt securities have the same high credit quality. Financial assistance should thus be organised under a single funding method that enhances the liquidity of Union bonds and the attractiveness and cost-effectiveness of Union issuance.
The need for a single funding method is emphasised in particular in the context of financial support to Ukraine given its urgent financing needs. Recent experience with the funding needs for Ukraine has highlighted the disadvantages of a fragmented approach to the organisation of the Union’s debt. In order to strengthen the Union’s position as an issuer of euro-denominated debt, it is of paramount importance that all new issuance be organised through a single funding method.
The model for a single funding method, and most elements of the infrastructure needed for its implementation, have already been established in the form of a diversified funding strategy under the mentioned above the Council Decision 2020/2053. That strategy has allowed the successful mobilisation of funds for grants and loans under the Regulation 2021/241 and for a range of other Union programs referred to in Council Regulation 2020/2094.
In view of the expected complexity of operations needed to satisfy the urgent financing needs of Ukraine, and to anticipate possible future borrowing and lending operations, it is appropriate to establish a diversified funding strategy as the single funding method for implementation of borrowing operations. Such a strategy should be based on the pooling of funding instruments. This would give the Commission flexibility to organise payments to the beneficiaries independently of market conditions at the time of disbursement, while also reducing the risk that the Commission would have to raise fixed amounts in volatile or adverse conditions.
The use of a diversified funding strategy should allow the flexible implementation of the funding program, while fully respecting the principles of budgetary neutrality and budgetary balance as set out in the Treaty on the Functioning of the European Union (TFEU, art. 310-1). The costs of the funding program should be fully borne by the beneficiaries based on a single cost allocation methodology that ensures the transparent and proportional allocation of costs. Repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with the Commission’s Financial Regulation.
The establishment of a diversified funding strategy as a general borrowing method has been legally approved by the EU regulation at the end of 2022.
More in: https://eur-lex.europa.eu/eli/reg/2022/2434/oj
Based on the member state requests for funding under the Recovery and Resilience Facility and the funding needs of other EU programs supported by NextGenerationEU, the European Commission expects to raise up to €637 billion by the end of 2026 (out of a maximum program envelope of €806.9 billion, as has been set in 2021).
On the NextGenerationEU program in: https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/nextgenerationeu_en
The EU borrowing is executed using multiple instruments, including EU-Bonds, EU-Bills, and NextGenerationEU Green Bonds. The Commission also makes use of different funding techniques, such as syndications and auctions. The Commission communicates its planned funding volumes to the market through bi-annual funding plans covering the next six months of operations.
Information for regular updates on the EU’s borrowing and lending activities can be seen on the Commission’s quarterly investor’s newsletter.
Funding instruments
Under the unified funding approach, the Commission uses a variety of funding instruments to place EU issuances on capital markets. In addition to long-term EU-Bonds and short-term EU-Bills, the Commission also issues NextGenerationEU Green Bonds, to finance the green component of the Recovery and Resilience Facility at the heart of NextGenerationEU.
Between 2020 and 2022, the Commission also issued social bonds to finance SURE, an instrument to protect jobs and incomes at the height of the coronavirus pandemic; the final issuance under the SURE program took place in December 2022.
= EU-Bonds. The EU-Bonds are the Commission’s main funding instrument under its unified funding approach. The Commission issues EU-Bonds with benchmark maturities from 3 to 30 years to implement its funding plan. The Commission issues EU-Bonds mainly through syndicated transactions and auctions. In addition to issuing new lines, the Commission can ‘tap’ already issued EU-Bonds, thus boosting their total outstanding volume. This makes these bonds more liquid in secondary market trading and hence more attractive to investors.
During half year in 2026, the Commission plans to execute 6 bond auctions.
More in the overview of the transactions executed by the European Commission in:
https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/eu-debt-securities-data_en#eu-bond-syndications
= NextGenerationEU Green Bonds. The Commission is seeking to raise up to 30% of NextGenerationEU funds through the issuance of NextGenerationEU Green Bonds and use the proceeds to finance green policies. With the NextGenerationEU Green Bond programme, the EU is expected to become the largest green bond issuer worldwide. The Commission executed its first NextGenerationEU Green Bond in October 2021.
More on the NextGenerationEU Green Bonds issues in:
https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/eu-debt-securities-data_en
NextGenerationEU Green Bonds are governed by the NextGenerationEU Green Bond framework. This ensures that NGEU Green Bond issuances align with the green bond principles of the International Capital Market Association (ICMA) and cohere with the Commission’s overall commitment to sustainability. On the basis of this framework, NGEU Green Bonds have also been added to the MSCI Global Green Bond Index.
= SURE social bonds. The Commission is the world’s biggest social bond issuer having issued €98.4 billion of social bonds between October 2020 and December 2022 to finance the EU’s now-closed SURE program. The SURE bonds are issued under the Social Bond Framework, which is compliant with the Social Bond Principles of the International Capital Market Association (ICMA).
The EU SURE program to finance short-term employment schemes across the EU and keep people in jobs during the coronavirus pandemic. In December 2022, the EU issued its last bond under SURE, raising €6.55 billion through a 15-year social bond. The transaction brought the total funding raised under the program to €98.4 billion, out of a maximum funding envelope of €100 billion (available only until the end of 2022). All SURE funds were raised through back-to-back issuance of the SURE social bonds.
These transactions have shown that the Commission has become one of the world’s most significant environmental, social and governance (so-called ESG-label) issuers, with the SURE social bonds accounting for 16% of global social bond issuance in 2021.
Source: https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/sure_en
= EU-Bills. The Commission is actively issuing EU-Bills, i.e. as securities with a shorter maturity of below one year; since September 2021, the Commission has been using auctions, in addition to syndications, to raise funds on capital markets. The Commission is auctioning both its EU-Bills and its EU-Bonds. The EU-Bills program gives extra flexibility to the Commission as an issuer, and is supporting the liquidity of its securities.
The EU-Bills program is helping the Commission to establish a regular and stable presence in the very deep and liquid money market. It also makes it possible for the Commission to widen its investor base by attracting new investors and different portfolios of existing investors.
In line with standard market practice, the Commission issues EU-Bills only via auctions.
More information about the auctions executed by the Commission, and the auction calendar in:
https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/auctions_en