The Heads of State or Government of the European Union are meeting in Brussels on Friday 17 July and Saturday 18 July to try to reach a unanimous compromise, which promises to be very difficult, on the European plan for post-Covid-19 economic recovery and the 2021-2027 Multiannual Financial Framework (MFF). No one can say at this stage whether an agreement is possible this weekend or whether another extraordinary summit will be necessary, perhaps as early as the end of July.
For the past two weeks, the President of the European Council, Charles Michel, has been negotiating frantically to prepare for this summit. The former Belgian Prime Minister, who held a video conference with German Chancellor Angela Merkel on Thursday 16 July, is hoping for an agreement this weekend.
This first face-to-face European Council since February will start on Friday at 10 a.m. with a plenary session, the idea being to focus on the main issues of the Recovery Plan and the MFF that require agreement.
“Then we'll see how the work progresses”, a European official said on Thursday.
The plenary session could last a long time and may be followed by bilateral meetings. There is every reason to believe that a new proposal or an amended version of Charles Michel’s ‘negotiating box’ (see EUROPE 12525/1) “taking into account the positions expressed by the Member States” will be forwarded to the national delegations, one source confirmed.
Several sticking points remain (see EUROPE 12528/6).
A Recovery plan reduced by €100 billion? Mr Michel has proposed a €750 billion European Recovery Plan, including €560 billion under the Recovery and Resilience Facility (€310 billion in grants and €250 billion in loans) that would help the countries most affected by the pandemic.
The beneficiary countries, as well as France and Germany, support these envelopes.
To finance this Plan, the Commission would be empowered to borrow on the capital markets on an exceptional and ad hoc basis (see EUROPE 12519/1).
The so-called ‘frugal’ countries (the Netherlands, Denmark, Sweden and Austria) and Finland are asking for a reduction in the amount of the Recovery Plan. For example, a new figure that reduces the amount of subsidies by €100 billion was mentioned.
Loans and grants. Mr Michel proposes preserving the balance between loans, guarantees and grants proposed by the Commission, in order to avoid overburdening highly indebted Member States and increasing disparities within the Single Market.
The frugal countries prefer loans rather than grants. The Netherlands still wants a system of ‘loans for loans’ and demands the involvement of the government and the national parliament whenever new public debt is incurred.
Governance. To qualify for support under the Facility, Member States will prepare national recovery plans for the 2021-2023 period as part of the ‘European Semester’ budgetary process. These plans would be reviewed in 2022, taking into account the final allocation key. The evaluation of these plans would be approved by the EU Council acting by qualified majority on a proposal from the Commission.
The Netherlands continues to call for a procedure requiring unanimity of the Member States, while the beneficiary countries want a procedure that remains technical, not political, to avoid delaying the disbursement of funds. France and Germany wish to avoid a situation where a country could block the adoption of a national plan.
Allocation key. Mr Michel proposed that 70% of the Recovery and Resilience Facility should be committed in 2021 and 2022, according to the allocation criteria proposed by the Commission. In 2023, 30% would be committed, based on the evolution of GDP in 2020 and 2021, to better take into account the impact of the pandemic.
The frugal countries and others, such as Belgium and Hungary, believe that these changes are moving in the right direction. However, the Netherlands considers the aid allocation key to be a vague and unresolved issue.
Several countries, such as Slovenia, regret that these new criteria have the effect of reducing funding for less developed EU members. They call for allocation criteria to remain as close as possible to the Commission’s original May proposal (see EUROPE 12494/1).
Rule of law. The Scandinavian countries, the Netherlands, Austria, France, Germany and Luxembourg support the establishment of a link between the disbursement of funds from the EU budget and respect for the Rule of law.
Hungary, which is threatening to block an agreement on the Recovery Plan, and, to a lesser extent, Poland, totally reject this approach.
Charles Michel is proposing a qualified majority decision in the EU Council to block European financial aid, whereas the Commission had suggested the use of a reverse qualified majority.
The frugal countries and others prefer the Commission’s proposal, which is “more conducive to countering certain foreseeable blockages”, according to one diplomatic source.
Mr Michel’s proposal represents a “balance” between the different positions within the European Council.
Size of the MFF. President Michel proposed an amount of EUR 1.074 trillion from 2021 to 2027, €20 billion less than the Commission proposed at the end of May.
However, some countries, such as Slovenia, regret the cuts affecting the Horizon Europe research framework programme and the Just Transition Fund. The so-called ‘cohesion countries’ also criticise the fact that Mr Michel’s proposal does not increase cohesion policy funding.
On the contrary, some of the frugal countries would be happy to see a MFF in the region of EUR 1.05 trillion. And the Netherlands still considers the share of the budget devoted to the Common Agricultural Policy (CAP) and cohesion to be too high.
Rebates. The President of the European Council proposed that flat-rate rebates be maintained for Denmark, Germany, the Netherlands, Austria and Sweden. However, a majority of countries are calling for the abolition of these budgetary correction mechanisms.
On the creation of new own resources, which is a priority for the European Parliament, a new own resource related to non-recycled plastic packaging waste would be introduced from 2021, according to Charles Michel’s plan.
The Commission would be invited to present proposals for a border carbon adjustment mechanism and a digital tax in 2021, with a view to their introduction by 2023 at the latest. The Commission would be invited to present a revised proposal on the EU Emissions Trading Scheme.
EU countries’ positions are divided on the different options, but the tax on plastics is the least controversial option. France is insisting on the digital tax and a carbon tax at the borders.
The creation of a Brexit reserve (outside the MFF) of EUR 5 billion is also proposed to address the negative consequences of the UK’s exit in the most affected Member States.
Brexit will mainly have an impact on smaller EU member states, a diplomatic source said.
Foreign affairs. In addition to the MFF, some delegations asked to discuss relations with Russia (miscellaneous item requested by one delegation) and Turkey (conclusions could be adopted on this item).
Unprecedented arrangements for a physical summit. A reduction in the size of delegations, limited press presence, health measures: the first physical meeting of the European Council since the coronavirus crisis will be very unusual in terms of organisation.
In addition to the social distancing measures, it was decided to significantly reduce the size of the national delegations from an average of 19 persons in normal times to only six persons.
The usual private meeting rooms will not be used. Meeting rooms will be scheduled to allow a distance of at least one and a half metres between participants.
EU leaders will hold their meetings in Room 5 (on the fifth floor) of the Europa building, which normally holds 330 people, but this time will only hold 31 for the leaders’ plenaries.
“The leaders will therefore be far removed from each other”, noted one source.
Special measures will be put in place: the rooms will be ventilated with fresh filtered, non-recycled air. The rooms where EU leaders meet will be cleaned after each break.
Mr Michel also asked the leaders to wear a mask at the beginning of the meeting, when safety distances are difficult to maintain, and at any time when these social distancing measures cannot be ensured. Wearing a mask will be mandatory for some people (protocol, security, catering, cleaning) and for photographers and camera operators.
The press will not be allowed in the EU Council building. There will only be a limited ‘pool’ of TV cameras and photographers. Journalists will not be allowed to ask questions as the leaders enter and exit the building. (Original version in French by Lionel Changeur, with the editorial staff)