On Tuesday 6 December, EU finance ministers failed to find a solution to four politically related issues, namely: - the protection of the EU’s financial interests in Hungary; - the Hungarian post-Covid-19 recovery plan; - the EU macrofinancial assistance to Ukraine for 2023; - the minimum taxation of multinationals (pillar II of the OECD agreement).
Hungary has refused to lift its veto on the last two issues mentioned, as it has not received assurances that the procedure under the ‘rule of law’ regulation that could lead to the suspension of EU cohesion funds will be cancelled, nor has it received the green light from Member States on its recovery plan.
“For me, it is one package. All elements must be adopted. It is better to vote on everything at once and the first item will be macrofinancial assistance to Ukraine. (...) If we want a positive result, it was better not to vote today”, said Czech Finance Minister Zbyněk Stanjura after the Ecofin Council.
The bulk of the ministerial discussions took place in camera at an informal breakfast, after which the Czech Presidency of the EU Council withdrew three matters from the Ecofin Council agenda. The Hungarian recovery plan, which the Council must adopt by the end of 2022 to avoid the loss of 70% of the €5.8 billion in grants allocated, was discussed in camera. Only a brief public statement was made during the session on macrofinancial assistance to Ukraine, which is an issue of particular concern to the Czech authorities.
Ukraine. Regarding aid for Ukraine of €18 billion in favourable loans for the whole of 2023 (see EUROPE 13064/3), Hungary still objects to the modification of the Multiannual Financial Framework (MFF) 2021-2027, which would allow the use of budgetary margins under the ceilings (‘headrooms’) to guarantee a European loan (plan A). It maintains that it wants to help Ukraine bilaterally. This operation would cost it €180 million plus interest instead of the €6 million of interest that would be its share of the interest for a European loan.
On Tuesday, the Ecofin Council nevertheless reached an agreement by a qualified majority of Member States to amend the Financial Regulation and find a solution for 26 countries involving the use of national guarantees (Plan B).
“Our ambition remains to enable the disbursement of aid to Ukraine in early January”, said Mr Stanjura, eager to demonstrate the EU’s unequivocal commitment to supporting Ukraine “for as long as necessary”. He asked the Council’s Economic and Financial Committee to explore “an alternative solution” that does not require the modification of the MFF.
The European Budget Commissioner Johannes Hahn said he was “fairly sure” that a solution will be found to avoid any delay in the disbursement of funds. He stressed the importance of having a common solution in terms of the EU’s “attractiveness” to investors in the capital markets.
European Commission Vice-President Valdis Dombrovskis has spoken of a funding gap of €6 billion for 2022.
Rule of law. At the end of November, the Commission maintained its proposal to suspend €7.5 billion in cohesion funds for Hungary for its persistent failure to protect the EU’s financial interests in the country (see EUROPE 13074/1). By referring the matter to the Member States, it obliges the EU Council to take a political position by a qualified majority of Member States by Monday 19 December.
On Tuesday, at the request of countries such as Germany, France and Italy, the Council asked the Commission to provide - by Friday - an updated assessment of the measures taken after 19 November (the deadline for the Commission’s currently available assessment) by Mr Orbán’s government to comply fully with the agreed list of measures in terms of the fight against corruption and judicial independence.
The Hungarian Parliament is expected to adopt new measures on Wednesday 7 December, in particular regarding the ownership of certain assets. The inclusion of new Hungarian measures could reduce the amount of EU cohesion funds that would be suspended, or even mean the procedure is withdrawn.
But the Commission is concerned that it will not be able to meet the deadline set by the Ecofin Council to update its assessment. The schedule is “extremely tight” and the Commission will do what it can, Mr Dombrovskis said.
The Member States’ ambassadors to the EU (Coreper) will meet to take stock of the situation by next Monday at the latest. They have until 16 December at the latest to find a positive solution on the four issues.
If agreed, the proposal could be submitted to any ministerial meeting of the Council for approval without debate, a diplomatic source said.
However, an extraordinary meeting of the Ecofin Council by 19 December cannot be ruled out, unless these politically sensitive issues are on the agenda of the EU summit in mid-December. “I don’t know if it will come to that”, said Mr Stanjura. He did not rule out holding an extraordinary ministerial meeting by video conference, although he said “it will not be possible next week”. (Original version in French by Mathieu Bion)