Key facts
- Spain proposed re-profiling EU debt payments to free up €70 billion over seven years.
- The proposal aims to increase investment in strategic sectors.
- Spain suggested linking debt service to long-term economic capacity, retiring debt by 2058.
- Current repayment plans would amount to 0.09%-0.11% of EU GNI annually over seven years.
- Spain also proposed allowing the Commission to issue member countries' debt on their behalf.
- The next EU long-term budget should have a ceiling equivalent to 2% of EU GNI.
Spain has put forward proposals to reform the European Union's long-term budget framework, aiming to unlock significant financial resources for strategic investments and bolster the bloc's financial stability. The proposals come as Europe faces mounting challenges, including energy costs, defense spending, and competition in artificial intelligence, requiring substantial investment to remain competitive.
At the heart of Spain's proposal is the re-profiling of debt repayments associated with the grant component of NextGenerationEU. Instead of repaying this debt faster than required, Spain suggests linking its service to the EU's long-term economic capacity, which would allow for an annual payment of about 0.06% of EU GDP and retire the debt by 2058. This approach, compared to the current plan of 0.09% to 0.11% annually over the next seven years, could free up nearly €70 billion during that period. This amount is equivalent to about one-fifth of the proposed European Competitiveness Fund, intended to channel investment into strategic sectors, and roughly one-third of the aid the EU has sent to Ukraine.
This debt management strategy aims not only to release extra resources but also to keep the stock of EU debt broadly stable in the medium term, potentially attracting more euro-denominated assets from investors. Furthermore, Spain has proposed allowing the European Commission to issue a portion of member countries' debt on their behalf, which could help create a deeper common market for European debt and generate an estimated €25 billion in annual interest savings.
Spain, set to become a net contributor to the next long-term budget, expressed willingness to "pay our fair share" to help the EU become a global powerhouse. The proposal advocates for a budget ceiling equivalent to 2% of EU GNI, which, while falling short of identified investment gaps, would address concerns of investors and citizens. The size of the next budget is seen as crucial for sending a message to voters ahead of upcoming elections, particularly in the face of rising populist far-right parties.