Luxembourg: driving the EU’s historic recovery programme

The United Kingdom’s departure from the European Union has consequences for all member states. But one of those consequences has put Luxembourg at the very heart of the EU’s ambitious economic support and recovery package in the wake of Covid-19. Melinda Perera, Capital Markets and Banking partner at Linklaters Luxembourg outlines how her team has contributed to the Grand Duchy’s role. 

In December 2019 The European Union and European Atomic Energy Community (Euratom) switched the legal framework of their debt issuance programme from English law to Luxembourg law. Widely established as a leader in issuing international debt securities, Luxembourg was chosen as the appropriate jurisdiction for both the governing law of the debt securities and place of listing. 

Linklaters Luxembourg was appointed by Credit Agricole Corporate and Investment Bank, as arranger, to implement a programme of debt issuance for the EU and Euratom. This was the first step to establish a model for issuing Luxembourg bonds by the EU and Euratom. 

“With the Covid-19 crisis, the EU through the Luxembourg law debt issuance programme mobilised significant financial means to fight the detrimental effects of Covid-19 on the economy and people in the EU.” Melinda Perera, Partner Capital Markets and Banking.

The debut of the EU’s temporary Support to mitigate Unemployment Risks in an Emergency (SURE) in October 2020 broke bond market records. Addressing the immediate need to preserve employment the €17 bn social bond issue saw demand soar to €233 bn, the largest ever social impact bonds of its kind. 

On 4 June 2021, the Commission launched a further EU record-breaking recovery instrument of €750 bn. Next Generation EU aims to build a greener, more digital, more resilient future while also supporting Member States in repairing their economies through funds raised on the financial markets. The programme has been extraordinarily successful, and we at Linklaters Luxembourg are proud to have played a part in facilitating the country’s high-profile EU social bonds programme. 

The Programme has been approved and admitted to trading on the Luxembourg Stock Exchange, a leading listing venue which fully embraces the international goals for green and sustainable finance. In 2016 the Luxembourg Green Exchange was launched providing a dedicated platform for green, social and sustainable securities. 

“As part of the Next Generation EU, Green Bonds will be issued based on the four pillars of the Green Bond Framework published by ICMA. The transition towards green and sustainable activities is definitely on the move and we are proud to count Luxembourg as a key player in this trend.” Delphine Horn, Consultant Capital Markets and Banking.

“We have been very lucky to be associated with this remarkable SURE adventure by assisting the underwriters on the first and subsequent SURE deals up to €100 bn. Knowing we participated in the implementation of a mass borrowing programme to protect jobs and keep people in work is truly rewarding. Having an impact in our day to day life and in the job that we do matters.” Laura Mbo, Associate Capital Markets and Banking.