Negotiations on the 2021-2027 Multiannual Financial Framework (MFF) and the Covid-19 post-pandemic Recovery Plan for Europe are gradually becoming more intense at political level.
On the basis of Article 324 of the Treaty on the Functioning of the European Union (TFEU), the President of the European Commission, Ursula von der Leyen, invited on Tuesday 2 July German Chancellor Angela Merkel, whose country now holds the Presidency of the Council of the European Union, together with the Presidents of the European Council, Charles Michel, and of the European Parliament, David Sassoli, to a coordination meeting on the post-2020 EU budget on Wednesday 8 July in Brussels.
“Negotiations begin now and the Parliament is ready. [...] Today I received a mandate from the Conference of Presidents, made up of leaders of political groups in the Parliament, to negotiate the terms for an ambitious agreement”, Mr Sassoli said in a statement. In his view, holding this meeting before the extraordinary European summit on 17 and 18 July will allow the EU27 to be clear on the European Parliament’s red lines in the negotiations, such as the creation of own resources.
On Wednesday 8 July, Ms Merkel will also present to Parliament the priorities of the German EU Council Presidency in the second half of the year.
Speaking on Thursday at a press conference with the German Chancellor, Mrs von der Leyen welcomed the fact that the Member States were “unanimous” on the architecture of the future European recovery plan. This architecture is based on massive fund-raising by the Commission, on behalf of the EU27, to finance the Next Generation EU initiative.
Of course, many details remain to be negotiated, such as the “size” of the plan and the distribution of aid in the form of grants or loans, she also acknowledged.
Referring to “intensive consultations”, Merkel hoped for an agreement of the EU27 on the 2021-2027 MFF “in July” and felt that the European Council had a responsibility to show citizens that it could act quickly to tackle the economic crisis caused by the pandemic.
New negotiating box expected by the end of next week
On the side of the European Council, Mr Michel is conducting wide-ranging consultations with his counterparts, including Ms Merkel and French President Emmanuel Macron, this Thursday.
In the second half of next week, he will present to the Member States a new negotiating framework (‘negotiation box’) in view of the General Affairs Council of 15 July.
On Wednesday, at a dinner with the ambassadors of the Member States (Coreper), he presented the outcome of his consultations and the main elements that could structure the future negotiating box.
To satisfy the beneficiary countries, Mr Michel wishes to maintain the level of the Recovery Plan for Europe as presented by the Commission at the end of May (€500 billion in grants and €250 billion in loans) (see EUROPE 12494/1). But, making a gesture towards the so-called ‘frugal’ countries, he plans to further reduce the total MFF envelope outside the recovery plan. And, to Germany’s satisfaction, he intends to retain the budget rebates.
The entourage of the President of the European Council believes that this approach is the only way to reach a compromise.
The resources of the recovery plan will be mobilised over the first years of the MFF, with Mr Michel envisaging a period of 3 years (2021-2023) for commitment appropriations and 6 years for payment appropriations.
The criteria for allocating European funds are one of the political nodes to be decided. On this point, Mr Michel heard requests from countries such as the Netherlands and the Visegrád group, for whom the criteria do not take sufficient account of the economic impact of the pandemic.
He is considering the possibility of allocating 70% of the recovery plan’s envelope in 2021 and 2022, keeping the criteria chosen by the Commission (e.g., unemployment rate over the last 5 years) and the remaining 30% on the basis of the fall in GDP in 2020 and 2021, as observed by the Commission in 2022.
Finally, Mr Michel plans to grant the EU Council a greater role in approving the national recovery plans that each country will present at European level. The comitology procedure gives too much power to the Commission, the Member States say.
German ambiguity on the maintenance of the MFF/rule of law link
In the ‘nego box’, Mr Michel is expected to maintain the legislative proposal to make the granting of European funding conditional on the beneficiary State respecting the rule of law.
Poland and Hungary entirely reject this approach.
“We want that in case the EU funds are misused that there is a mechanism that makes sure that, in the interest of all 27 Member States, we can prevent that and we can end such a situation”, said Mrs von der Leyen, seeing the proposal as an “essential” part of the package.
Supporting the words of the former German Defence Minister, Ms Merkel welcomed the mechanism in the making, which will make it possible to monitor respect for the rule of law in all Member States.
But “in order to link funding to rule of law, you need funds in the first place”, said the Chancellor, who considers that the European Council will have to ensure at the summit on 17-18 July that the EU has an operational MFF by January 2021.
In the EU Council, discussions are going well. On Thursday, the Member States’ Ambassadors to the EU (Coreper) continued their discussions on the revised MFF proposal, specifically addressing issues related to the eligibility and governance of the Recovery and Resilience Facility integrated in the European Recovery Plan, as well as the thematic conditions for EU funding.
According to the proposal on the table (see EUROPE 12494/2), Member States will have to present national recovery plans which the European Commission will analyse in the light of the political priorities set at European level (green and digital transition) and the socio-economic policy recommendations it addresses to each country in the framework of the ‘European Semester’ budgetary process. Once this plan has been agreed informally between the Commission and the Member State, Member States would be invited to decide on the plan through the comitology procedure.
During the discussion, the so-called ‘frugal’ countries reiterated their position calling for a transparent procedure that is as legitimate as possible from a democratic point of view. In particular, the Netherlands advocated that the EU Council should take a decision by delegated act on the national recovery plans, or even on each disbursement of a tranche of aid. Spain and the countries of southern Europe, on the contrary, want to keep to comitology, in order to prevent the process from becoming politicised and to avoid excessive administrative burdens that would slow down aid being granted.
“The most important issue at the end will be the conditionality. And how the reforms efforts are reviewed. Not a ‘troika’, but it will have to be instrumented to make sure that rules in terms of conditions are respected”, said German Foreign Minister Heiko Maas. (Original version in French by Mathieu Bion with Camille-Cerise Gessant)