The Heads of State or Government of the 27 EU countries will meet from Thursday 20 February in Brussels for an obstacle course leading to a compromise on the elements of the EU financial framework (MFF) for 2021-2027 (see EUROPE 12427/1).
Anyone who can predict whether an agreement between EU leaders will be reached on Thursday or Friday, or even Saturday morning, between EU leaders on the next MFF is a clever one.
Everything will depend on the political will shown, insists one diplomatic source, knowing that delegations are very divided on the modalities of the next MFF. The UK’s departure from the EU, which leaves a deficit of €75 billion over 7 years, is a “complementary constraint”, sources admit.
There is a willingness to “see the negotiations through to the end, but no one can say whether we will succeed”, commented a European source.
Last week, the President of the European Council, Charles Michel, presented his ‘negotiating box’, a costed proposal that will form the basis for negotiations at the highest level on the MFF.
The European Council will begin on Thursday 20 February at 3:00 pm with a round table discussion on the MFF, prior to bilateral consultations.
The total volume of the budget will be a very sensitive issue, as the four so-called ‘frugal’ countries (the Netherlands, Austria, Denmark and Sweden) are working together to limit the next MFF to 1.00% of the EU’s Gross National Income (GNI). However, Mr Michel’s compromise relies on a rate of 1.074%, which these four countries consider too high. For them, 1% already represents a substantial increase in their contribution, which is why they are asking for the rebates to be maintained, even after the United Kingdom leaves.
France has never wanted to publish figures on total volume, preferring to focus on the content of policies and the structure of revenues.
Germany is closer in budgetary terms to the position of the four frugal countries, but is also prepared to make compromises. German Chancellor Angela Merkel on Wednesday predicted “very tough and complicated negotiations” on the MFF. She believes that “our concerns have not yet been adequately addressed in many areas”.
Revenues and rebates. Mr Michel’s proposal provides for regressive ‘lump sums’ for five countries (the four ‘frugal’ countries plus Germany). A compromise will have to be found on the basis of these principles (regressive amounts), although 18 EU countries, including France and Italy, believe that these rebates should be ended. The revenue side promises to be the toughest part of the negotiations.
In addition, the four ‘frugal’ countries are calling for further cuts in the agriculture and cohesion policy envelopes, while the ‘friends of the CAP’ and ‘friends of cohesion’ are trying to keep the 2021-2027 cuts to the current MFF to a minimum.
Agriculture. Mr Michel’s plan provides for an increase of €10 billion over the Finnish proposal: €2.5 billion for direct aid, €2.5 billion for rural development and €5 billion for emergencies (such as trade disputes). One diplomatic source points to “positive developments” in the Finnish and then Mr Michel’s compromises, compared to the initial proposal, “but that is not the point. We’ll have to go back over those numbers”. The CAP needs to be reformed and modernised, says the negotiating box proposed by Mr Michel.
“We can talk all night about the share of cohesion and the share of agriculture, but if the cake is too small, it won’t solve anything”, a European diplomatic source predicted.
Cohesion. Mr Michel’s draft foresees a fairer distribution of cohesion policy funds (transfer of €5 billion from rich to less developed regions) and increases the total envelope by €6 billion compared to the Finnish compromise. However, the total decrease amounts to 12.8% compared to the current MFF, which poses problems for several ‘cohesion-friendly’ countries, which will try to limit this reduction.
Mr Michel’s proposal makes available €11 billion to give gifts to Member States at the very end of the negotiations.
Rule of Law. Some northern European countries complain that Mr Michel’s draft weakens the mechanism for protecting the EU budget against failures in the rule of law. However, according to some sources, Mr Michel’s proposal has the merit of validating the mechanism. It will be necessary to find a compromise on the voting rule. However, according to one diplomat, even with Mr Michel’s wording, in the event of an obvious problem, there should be no problem with a qualified majority in the EU Council to support the Commission’s proposal. “It is highly unlikely that more than 13 countries would oppose a proposal tabled by the Commission”, one source also said.
Furthermore, some delegations are concerned about the planned 40% reduction in administrative costs.
Climate. Mr Michel’s framework provides €7.5 billion for the Just Transition Fund. This fund is “totally linked to the 2050 climate neutrality target for everyone”, says a European diplomatic source.
Mr Michel has also planned to provide climate and digital investment through a €10 billion recapitalisation of the EIB, but not all delegations think this is a good idea.
See the ‘negotiating box’ tabled at the European Council: http://bit.ly/2UTeRk6 (Original version in French by Lionel Changeur, with the editorial staff)