On Thursday 23 July, Johannes Hahn, the European Commissioner for Budget and Administration, told a small group of journalists that ratification by Member States of the decision to raise the EU's own resources ceiling to cover loans under the Recovery Plan (€390 billion from a total of €750 billion) within three or four months was “a major challenge”.
If the EU Parliament and the Council of the EU are able to reach agreement on improvements to the EU's Multiannual Financial Framework (MFF) for 2021-2027 and the EU's post-Covid-19 Economic Recovery Plan in September or October, so that borrowing can begin on the markets in early 2021, there will be very little time left to ratify the decision to raise the own resources ceiling. Hahn noted that, under normal circumstances, the ratification procedure takes an average of two years and, under the fast-track procedure, about one year.
Decisions regarding the system of Own Resources have to be taken unanimously in the Council of the EU, which takes the opinion of the European Parliament into account, and must be ratified by the Member States.
The European Council’s conclusions state that “the amounts of the own resources ceilings shall be temporarily increased by 0.6 percentage points for the sole purpose of covering all liabilities of the Union resulting from its borrowing to address the consequences of the Covid-19 crisis, until all these liabilities have ceased to exist, and at the latest until 31 December 2058”.
In order to provide the European Union with the means needed to meet the challenges posed by the pandemic, the Commission will be authorised to borrow funds on behalf of the Union on the capital markets. The proceeds will be transferred to EU programmes in accordance with Next Generation EU.
In their resolution of 23 July, MEPs called for a satisfactory agreement to be reached with the Council of the EU, “preferably by the end of October at the latest”.
Hahn hopes that a European Parliament/Council of the EU agreement on the next MFF and the Recovery Plan will be reached “by the end of September”. “I am very ambitious... October is possible too, but that would already be on the late side, because we also have to adjust our draft budget plan for 2021”, said the Commissioner for Budget and Administration.
Retroactivity for REACT-EU. The European Council decided to reject the Commission's proposal with regard to the €11.5 billion to be mobilised in 2020 for pandemic-related measures. But, as the Commissioner for Budget pointed out, the Commission has dealt with the problem in a way, by making provision for “retroactivity” in both the REACT-EU fund (appropriations under the cohesion policy), the total budget for which was set by the European Council at €47.5 billion, and particularly in the Recovery and Resilience Facility, which has been allocated €672.5 billion, including €312.5 billion in grants (€360 billion in loans). Once ratification of the Own Resources Decision is completed, “we will be able to start borrowing” on the markets, said Hahn.
Own Resources. In the first half of 2021, the Commission will present an “assessment” and a proposal on “potential new Own Resources”, in addition to the “plastic tax”, which is expected to bring in €5.7 billion a year from 2021, the Commissioner said.
Other potential new Own Resources (EU emissions trading scheme, border carbon adjustment mechanism, digital tax or financial transaction tax) should also be used to repay the loan from 2026 onwards.
The agreement, as envisaged, “puts pressure” on EU countries to agree on new Own Resources (as repayments start when the next MFF starts). Otherwise, national contributions will have to be increased, said Hahn.
In addition, Hahn confirmed that 30% of the more than €1,800 billion (Recovery Plan and next MFF), or more than “€600 billion, must be climate-related”, and that will also be a challenge.
The European Council conclusions have to be translated into the following legal texts: Own Resources Decision, MFF Regulation, Interinstitutional Agreement and Next Generation EU Regulation. (Original version in French by Lionel Changeur)