Tuesday

5th Jul 2022

Agenda

EU leaders clash over corona recovery This WEEK

EU leaders will have another go at agreeing to measures to mitigate the vertiginous economic fallout of the coronavirus pandemic. However, there is little sign that divisions have eased among the 27.

The various prime minsters, chancellors and presidents will hold a videoconference on Thursday (23 April) and be under pressure to come up with convincing steps - risking political and financial backlash from markets if they fail.

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Efforts to tackle the economic fallout have been so far largely left to the European Central Bank (ECB) - as happened in the debt crisis a decade ago before governments managed to gap to fudge differences to address the recovery.

Borrowing costs for already deeply-indebted countries, such as Italy, currently remain below the levels seen during the debt crisis but that could change quickly.

One outstanding issue is joint-debt issuing. Here, the Netherlands, Finland, Austria, and Germany are holding out, fearing it would loosen financial reforms in southern member states.

Another issue will be a recovery fund for after the health crisis, where the EU Commission has been arguing for using the next seven-year EU budget as a vehicle to leverage money, with member states' guarantees. This idea could also circumvent differences around the joint debt issuance.

The commission has also been arguing for a larger budget to revive growth after the pandemic and using cohesion funds to help worst-effected regions.

Talks over the 2021-2027 EU budget have been at a standstill, however, as member states struggle to bridge the financing gap left by the UK and at the same time invest more into both climate change and digitalisation.

The seven-year budget is usually set around €1 trillion, or 1.0 percent of the EU gross national income, but recovery from the deepest crisis since the second world war will likely require more funds.

The commission will come forward with a new budget proposal before the end of the month, after EU leaders give guidance on what they are willing to change in their approach to the budget.

Negotiations are more difficult in the virtual world, as deals are usually hammered out through gruelling night-long personal meetings in Brussels - with plenty of bilateral talks on the margins to bridge differences.

The debate comes as some member states have cautiously started easing lockdown measures. Governments will try to bring life back into the economy while avoiding a renewed surge in coronavirus infections.

Poland, Hungary

Prior to the EU leaders online meeting, EU affairs ministers will also hold a videoconference on Tuesday (21 April) where government measures under the corona lockdown will be discussed.

While it is not on the agenda, some member states could bring up concerns over Hungary, and Poland, both which are under EU probes already.

In Hungary, emergency powers for the government have been extended practically indefinitely, and in Poland, the electoral code has been changed to be able to hold a presidential election on early May favouring the ruling party.

The European Parliament on Friday (17 April) adopted a resolution saying that both measures are "incompatible with European values" and called for the commission and the council of member states to act.

On Thursday, MEPs in the civil liberties and home affairs committee will hear from justice commissioner Didier Reynders over concerns that some emergency measures might break EU rules.

Online MEPs

The European Parliament has been struggling to fill in its role in holding commissioners to account and hearing from EU decision-makers - as most MEPs are stuck in their home countries and meetings have been largely virtual.

But next week the parliament will swing into action.

European lawmakers on Monday will hear from commission vice president Valdis Dombrovskis and Elisa Ferreira, commissioner for cohesion policy, on the economic impact of the crisis.

MEPs on the transport committee on Tuesday will quiz internal market commissioner Thierry Breton on the pandemic's effect on the tourism sector.

MEPs from the trade committee will hear on Tuesday from trade commissioner Phil Hogan on the export of face masks and foreign investment in the time of pandemic.

On Tuesday, commission vice-president Frans Timmermans will brief MEPs in the environment committee.

On Monday (20 April), MEPs will hold a remote hearing with the EU foreign affairs chief Josep Borrell on the foreign affairs aspect of the coronavirus pandemic for the EU.

On Tuesday, EU foreign ministers will hold a videoconference.

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