24th May 2022

Germany asks capitals to give a little in EU budget impasse

  • German minister for EU affairs Michael Roth said for a compromise on the budget painstakingly hammered out at the July summit, the the Council must move too (Photo: Council of the European Union)

German state minister for EU affairs Michael Roth warned EU capitals on Tuesday (13 October) to be flexible in talks with the Parliament on the long-term EU budget and coronavirus recovery package or risk unravelling the fragile deal reached in July and taking the issue back to EU leaders.

The German EU presidency and negotiators from the European Parliament have been locked in tough talks over the €1.8 trillion package.

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"We also need openness and flexibility from the council [of member states]," Roth told fellow EU ministers at their meeting in Luxembourg.

The parliament is digging its heels in by seeking €39bn in additional funding for EU programmes, such as Horizon research program and the Erasmus student exchange.

The German EU presidency has insisted it cannot significantly increase the budget ceilings, or move the recovery fund's financing outside of the budget - without passing the ball back to EU leaders.

Roth warned "a compromise means we have to get closer to each other," adding "this applies to the parliament but also to us".

"The parliament wants to reopen July deal to provide fresh money substantially above the ceiling, this in our view would be a very dangerous path, which could unravel the entire package," Roth said, adding that there is a need to break the current deadlock.

"I need your green light. […] If we cant build on your support in order to converge the threat is a serious crisis which we certainly want to avoid," he said.

Negotiators on the EU budget and coronavirus recovery package will meet on Wednesday morning.

The parliament's chief negotiator MEP Johan Van Overtveldt on Tuesday in a letter to the German EU ambassador offered to move closer to member states' position.

The former Belgian finance minister said the parliament is "not interested in budgetary tricks" in finding the €39bn, instead he insisted on agreeing to higher amounts dedicated to the programmes.

According to the parliament's new compromise offer, there must be an increase of €9bn in additional funds - an approximate sum the German EU ambassador has offered before - and moving the €13bn of the recovery fund's financing out of the budget.

Rule-of-law link?

Parliament negotiators and diplomats from the German EU presidency also had their first discussion on the exact legislation that would link EU funds to the respect of rule of law on Monday evening, which is another key hurdle in budget talks.

MEPs called the talks "constructive", adding that "council's and parliament's positions remain far apart from each other".

One of the main disagreements revolve around the scope of the issues that could trigger the mechanism.

The council wants to keep the procedure tightly linked to EU budget issues - while MEPs and some member states want the respect of EU values to be also included.

What makes the talks especially difficult is that the compromise of the German EU presidency - representing the council of member states - is also seen to be shaky.

Both strong supporters of the rule of law conditionality - such as the Netherlands - and those rejecting it - such as Hungary - has said the council position drawn up by the German presidency is not good enough.

At the same time, there is a broad majority in the parliament for strengthening the rule of law-budget link.

Meanwhile, on Tuesday, Polish EU minister Konrad Szymanksi reiterated Warsaw's threat that the Polish parliament cannot ratify the new EU levies needed for the recovery fund if the rule of law conditionality is not to Warsaw's liking.

But Sweden, Finland and Denmark and the Benelux countries once again called for a strong and effective mechanism.

Hungarian justice minister Judit Varga accused those countries - with the Netherlands and its northern European allies being reluctant to agree to a large recovery fund in July - of foot-dragging.

"Those who never truly supported the economic recovery of Europe, they are now using the rule-of-law conditionality, completely absent from the European Council conclusions, as a pretext to dismantle the agreement," she told fellow ministers, referring to EU leaders' July summit deal.

Hungary had also threatened to hold back the ratification of new levies if the rule-of-law link is strengthened.

EU budget talks suspended in fight for new funds

MEPs are requesting additional, new funding of €39bn for 15 EU programs. The German presidency argues that budget ceilings, agreed by EU leaders at a marathon summit in July, will be impossible to change without a new leaders' meeting.

EU parliament vows not to cave in to budget pressure

The parliament's majorty dismisses the German EU presidency's proposal on the rule of law conditionality, which has emerged as the main political obstacle to agree on the next long-term EU budget.

Massive MEP majority for better rule-of-law mechanism

A large majority of MEPs back an initiative to streamline the EU's tools on protecting rule of law and democracy and have effective sanctions. They also backed a tough stance on the rule of law conditionality in budget talks.

Budget deal struck, with Hungary threat still hanging

Ultimately, the European Parliament managed to squeeze an extra €16bn in total - which will be financed with competition fines the EU Commission hands out over the next seven years, plus reallocations within the budget.

Commission grilled on RePowerEU €210bn pricetag

EU leaders unveiled a €210bn strategy aiming to cut Russian gas out of the European energy equation before 2027 and by two-thirds before the end of the year — but questions remain on how it is to be financed.

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