The Heads of State or Government of the European Union confirmed their differences on the Recovery Plan for Europe and the EU’s Multiannual Financial Framework (MFF) for 2021-2027 (see EUROPE 12509/1) on Friday 19 June at their fifth meeting by videoconference since the outbreak of the Covid-19 pandemic. However, they are determined to reach a unanimous agreement before the summer break.
Actual negotiation will take place at a European summit in Brussels in mid-July, in the classic format, for the first time since the failure of the February summit already devoted to the MFF (see EUROPE 12431/1).
At the end of the proceedings, the President of the European Council, Charles Michel, recalled that this was the first debate at this level, following the presentation, at the end of May, of proposals on a €750-billion recovery plan and a post-2020 MFF amounting to €1.1 trillion (see EUROPE 12494/1).
Proceed to the negotiation phase. “A consensus is emerging on different points, but we do not underestimate the difficulties on different issues”, Mr Michel acknowledged. “We are moving to another phase, the negotiation phase”, he said. He will convene an extraordinary summit on the post-2020 EU budget around mid-July, and with this in mind, he will present “concrete proposals” (‘negotiating box’) beforehand.
Wasting no time. Many leaders stressed the need to move quickly in order to maintain the momentum of the European response to the crisis and to allow a rapid delivery of European support to reduce the scale of the unfolding economic crisis.
Considering the proposal on the table as “a starting point”, the Spanish Prime Minister, Pedro Sánchez, warned via Twitter: “The more time we waste, the deeper the recession will be”. “This is not the time to draw red lines, but to open up green lanes for an agreement as early as July”, added António Costa, the Portuguese Prime Minister.
The President of the European Commission, Ursula von der Leyen, recalled that the current MFF expires at the end of 2020. “We must therefore waste no time in implementing our economic recovery strategy”, she warned. “EU leaders unanimously recognised the seriousness of the crisis, which justifies an ambitious common response combining solidarity, investment and reform”, she added.
Mrs von der Leyen also noted that “many leaders” had said that every effort should be made to “reach an agreement at the European Council before the summer break”.
However, the Dutch Prime Minister, Mark Rutte, has expressed doubts about the ability of the EU27 to keep to this tight schedule.
The hardest part is still to come. The President of the Commission confirmed the known divergences between Member States on certain subjects, such as “the total volume of the recovery programme, the balance between grants and loans, the distribution keys, the new own resources and rebates”.
In order to be able to borrow large amounts on the markets, the Commission proposes to raise the own resources ceiling. This approach requires unanimity in the European Council, the agreement of the European Parliament and ratification by the national parliaments, in order to establish the widest possible “democratic legitimacy”.
“That is why leaders must be provided with solid arguments to present to their respective national parliaments to get the debate going”, Mrs von der Leyen said. She spoke of the importance of a united European response to the crisis, through which the most affected countries, such as Italy and Spain, would be the main beneficiaries of aid, but would contribute to the EU budget only to the extent of their national wealth. The European recovery plan should also serve to avoid widening gaps between Member States, as this would weaken the internal market, the Commission President said.
The discussion remains “difficult and complex” on some topics, Mr Michel acknowledged. He cited the size of the MFF, discounts, the balance between grants and loans, the conditions for granting aid and the criteria for allocating EU funding.
Allocation criteria. On the latter point, some countries, such as the Visegrád Group (see EUROPE 12505/5) and the Netherlands, would like the allocation criteria to take greater account of the effects of the Covid-19 crisis.
“We’ve done other simulations with the spring economic forecasts. You see there is no significant change in the allocation”, said Mrs von der Leyen. This shows that the use of unemployment rates over the past five years is “very plausible”, she added, noting that the crisis is affecting mostly countries that were not resilient enough beforehand to absorb its effects.
The loan/grant balance. The so-called ‘frugal’ countries – the Netherlands, Austria, Sweden and Denmark – are calling for a much lower overall level of spending than the €750 billion proposed for the recovery plan. They also argue for granting loans, which each State will therefore have to repay in the long term, rather than subsidies.
“We advocate cheap loans rather than subsidies. I will continue to work in close coordination with the Prime Ministers of the Netherlands, Denmark and Sweden”, said Austrian Chancellor Sebastian Kurz.
The Franco-German pair defends its joint proposal to grant €500 billion in the form of budget transfers. German Chancellor Angela Merkel noted that positions on this point “have not changed”. There is a consensus on a combination of loans and grants, but the question of volume remains open, she said. And some countries consider the volumes too high, while others only want subsidies.
Ecological and digital transition. For Mr Kurz, it is also important to know what the budgetary resources of the European recovery plan will be used for. “In our view, investment in future-oriented areas such as digitisation and greening should be the first priority, and the allocation of funds should be made conditional on reforms to increase competitiveness”, he stressed.
Mrs von der Leyen noted that many EU leaders had focused on investments in the ecological and digital transition.
It will be up to Member States to present national recovery plans taking into account the socio-economic policy recommendations issued by the Commission in the context of the ‘European Semester’ budgetary process.
Own resources. The Prime Minister of Luxembourg, Xavier Bettel, called for a “modern and reformed” MFF, both in terms of expenditure and revenue.
The Commission suggests several possibilities for financing the €500 billion by finding new resources to feed the EU budget, without increasing the national contributions of the States.
The latest compromises presented to the EU27 before the pandemic retained two new sources of funding from the EU budget: the tax on plastics and revenue from the ETS system, but here again a compromise will have to be found between the Member States.
Germany confirmed that the debate will be difficult on the rebates, as the countries benefiting from them (Germany, Denmark, the Netherlands, Sweden and Austria) are asking for the continuation of budgetary correction mechanisms after 2020. France, like many countries, is of the opinion that after Brexit and the end of the ‘British cheque’, discounts are no longer necessary.
Berlin is also calling for a shorter duration of the recovery plan and for the loans to be repaid earlier than the loans that the Commission will take out on behalf of the EU27, i.e., before 2028.
The red lines of the European Parliament. At a press conference held after his address to the EU27, European Parliament President David Sassoli said the Commission’s proposal on the recovery plan was a good starting point for the negotiations, although he said the MFF should be more ambitious, especially with regard to the Erasmus+ envelope.
“We need democratic control” over how the stimulus package and the MFF will be spent, he added.
The creation of new own resources for the EU budget would also make it easier to repay loans, Mr Sassoli added. “We need progress on own resources, otherwise Parliament will not agree to the MFF”, he hammered.
On Thursday, the presidents of the pro-European political forces in the European Parliament again detailed their vision of a 2021-2027 MFF acceptable to them. (Original version in French by Lionel Changeur, with Mathieu Bion, Pascal Hansens, Damien Genicot and Agathe Cherki)