The EU finance ministers will discuss, on Tuesday 6 December, possible financial sanctions against Hungary for failing to protect the EU’s financial interests due to breaches of the Rule of law in that country (see EUROPE 13074/1 and 13075/20).
However, no decision is expected to be taken on this issue, partly due to the lack of time in the EU Council to consider the European Commission’s assessment and the latest information provided by the Hungarian authorities. As a result, other related dossiers - the Hungarian post-Covid-19 recovery plan, the minimum taxation of multinationals (pillar II of the ‘OECD’ agreement), and even the EU’s macro-financial assistance to Ukraine for the whole of 2023 - are likely to remain blocked due to a lack of unanimity among Member States.
The Czech Presidency of the EU Council nevertheless wants to put these four dossiers on the agenda of what it hopes will be the last Ecofin Council under its Presidency. If the deadlock persists on Tuesday, an additional ministerial meeting is not excluded to try to resolve these issues before the EU summit in mid-December, given that an EU Council decision on the ‘Rule of law’ regulation must be taken by Monday 19 December.
On Thursday, at the meeting of Member States’ ambassadors to the EU (Coreper), several Member States, including Germany, France, Italy and Spain, requested that the European Commission update its assessment of the ‘Orbán’ government’s compliance with its commitments to fight corruption and strengthen the independence of the judiciary, including measures taken after the 19 November deadline set by EU law. In particular, new measures are reportedly scheduled for adoption in Hungary on Wednesday 7 December.
When asked on Friday, the European Commission did not confirm that it had been officially mandated to update its analysis.
Other Member States, such as the Benelux countries and the Scandinavian countries (although Finland and Sweden do not want to offend Hungary, which has yet to ratify its membership of NATO), support the Commission’s analysis. They are also aware of the efforts undertaken by Budapest, which should be recognised and encouraged.
Hence the possibility that an updated assessment will facilitate a final decision that is proportionate to the extent of the breaches of the Rule of law that are still evident, while the Commission has been advocating since September the suspension of €7.5 billion in cohesion funds if a package of seventeen measures is not put into practice.
On Friday, a diplomat from a country that favours an update of the Commission’s assessment listed the criteria that should underpin this novel and politically charged ‘Rule of law conditionality’ procedure: “objectivity, fairness and credibility”.
Stability and Growth Pact. Following the Eurogroup meeting on the previous day (see EUROPE 13075/16), the ministers will have a first exchange of views on the reform of the European economic governance framework that the Commission suggested in early November (see EUROPE 13060/1).
Germany and other frugal countries are concerned that the Commission could be too lenient if the proposed reform leads to a differentiation of national deficit and debt reduction paths that leaves too much room for manoeuvre for less fiscally virtuous countries.
According to a second diplomat, the aim in the EU Council is to reach an agreement on the main objectives of the reform in March so that the legislative work can start immediately afterwards.
It should be noted that the Ecofin Council will take stock of the implementation of the Next Generation EU Recovery Plan and will be informed about the start of the fiscal process of the European Semester (see EUROPE 13068/23).
Taxation. The ministers will also discuss the revision of the energy taxation directive (see EUROPE 12762/9). This legislative proposal, which is part of the July 2021 ‘Fit for 55’ package, includes a restructuring of the EU framework for the taxation of energy products and electricity.
Despite intensive work at technical level, unanimous agreement by the Member States was not reached. “There is still technical work to be done to reach solutions acceptable to all Member States”, according to the document preparing the ministerial debate dated Friday 25 November.
In particular, the Czech Presidency would like to raise the issue of a minimum level of taxation within the EU and the length of transitional periods to take account of current circumstances. The opinion of the European Parliament is pending (see EUROPE 13018/15).
See the Czech preparatory document: https://aeur.eu/f/4g1
The Ecofin Council will also adopt conclusions on the progress made in tackling harmful business taxation, following the agreement in November on the reform of the dedicated Code of Conduct Group (see EUROPE 13059/5).
Budget. Finally, the Czech Presidency will present a paper on the state of play in the EU Council on the introduction of new own resources for the EU budget.
The European Parliament has adopted its opinion on the first basket (Carbon Border Adjustment Mechanism, EU Emissions Trading System, clean resource based on the reallocated profits of very large multinational companies) presented by the European Commission.
See the Czech report which focuses on sectoral negotiations on these three topics: https://aeur.eu/f/4g2
Finally, on the 2023 EU budget, the Ecofin Council will make a statement on the administrative expenditure of the EU institutions. And the President of the European Court of Auditors will present his report on the implementation of the EU budget in 2021 to the Ministers. (Original version in French by Mathieu Bion with Anne Damiani and Lionel Changeur)