EXCLUSIVE: EU Budget Commissioner: SURE Successful in Achieving Its Goals

22 April 2021

By David Barwick – FRANKFURT (Econostream) – The European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) has been successful, Johannes Hahn, European Commissioner for Budget and Administration, said Wednesday.

In an interview with Econostream, Hahn said the EU Commission was discussing with other sovereign debt issuers how to react to the trend of increasing order book size.

The recently published report on SURE ‘shows that the programme is successful in achieving its goals’, he said, noting that the initial positive reception had led a further half dozen member states to pursue almost €4 billion in additional funding under the programme.

‘This new round of demand shows the success of this programme’, he said. ‘However, I am not in a position to speculate what the Commission will do after the expiration of this programme.’

Asked with respect to France’s initiative to tackle inflated orders in syndications whether the issue concerned him as well, Hahn replied, ‘The Commission follows the discussions on inflated orders in order books with interest. We are also in exchanges with peer issuers on this issue.’

Speaking days after the EU Commission announced details of how the Next Generation EU recovery fund would be funded, Hahn called the possibility of using  short-term borrowing as a complementary instrument ‘a clear plus’ that would ‘provide the Commission with more flexibility to adapt to changing market conditions’ and ‘ensure that we can implement our funding operations as effectively and as efficiently as possible.’

‘The issuance of such instruments will furthermore give the EU access to new deep and liquid segments of the market and widen the investor base’, he said. The EU is not currently active in the bill market segment, unlike many non-European central banks, bank treasuries and asset managers he noted, but ‘the bill programme will allow the EU to attract additional investors or additional portfolios of existing investors.’

EU-bills would be issued regularly, giving the EU ‘the flexibility to determine the size of each transaction based on the actual liquidity needs’, he said. ‘In case transactions in the bond market are difficult, the volume of the EU-bills programme can be increased to bridge temporarily such difficult market situations.’

Hahn reiterated that issuance by the EU Commission would be independent from that of the ESM. He repeated the Commission’s intention to communicate ‘in due time before the first transactions’ relevant information including the targeted amounts, instruments and funding channels. Specific maturities would be communicated in the context of individual transactions.

Auctions would be used for both EU-bonds and EU-bills, which ‘is important in order to ensure that the EU can make best use of the benefits of auctions as an issuance tool’, he said. The EU would structure its issuances across the entire maturity spectrum to establish and maintain liquidity along the curve, he said, so that the weighted average of the maturities would be a function of market opportunities as with any large issuer.

However, he reminded, Next Generation EU bonds have a maximum maturity of end-2058, at which point all liabilities must be fully repaid.