Wednesday

17th Aug 2022

EU recovery agreement deal may need 'personal' summit

  • An 'in-person' summit of EU leaders might be needed to deal the deal on the EU budget and the recovery fund (Photo: European Council)

The EU Commission will on Wednesday (27 May) set out its revised long-term budget proposal and plans for economic recovery after the Covid-19 pandemic brought Europe to a near-complete standstill.

Commission president Ursula von der Leyen will present the plans to journalists and MEPs on the recovery plan, tied to the new seven-year budget kicking off next year.

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It is expected to nudge the EU towards further integration by allowing the commission - temporarily - to borrow money on the financial markets against an increased own resources in the EU budget, in order to hand out as grants and loans to member states.

The budget and the recovery plan need to be agreed by EU leaders and the EU Parliament, but elements of it, such as the increase in the own resources, need to be approved by national parliaments.

EU leaders - who have so far met via videoconference during the coronavirus lockdown - are scheduled to have their next gathering on 18 June.

Face to face?

EU diplomats and officials suggest a personal meeting of EU will be essential for an agreement on the budget and recovery, as existing deep divisions are difficult to overcome online, and budgets are agreed in last minute haggling.

It also remains a question if EU leaders can agree in one go, or a deal requires a second meeting in July.

Commission vice-president Maros Sefcovic on Tuesday called on governments to agree swiftly.

"We need rapid political agreement, to launch the new programmes there is no time to waste, we need a European Council decision in June to be ready on time with all the programmes, therefore the stakes are so high," he said after meeting with EU affairs ministers, adding "at least" half of the ministers pleaded for speedy decision.

"18 June is our desired outcome," Sefcovic said, adding he told ministers to look at this proposal with different "optics", not only with budgetary, financial aspects.

"Therefore I was pleading [in the meeting] so much for the political leadership to overcome the current crisis, and relaunch the economy," Sefcovic said.

Croatian state secretary for European affairs, Andreja Metelko-Zgombic, whose country holds the EU's rotating presidency, said member states needs to reaffirm the credibility of the EU economy.

"All member states are aware that the time for a final compromise and for providing us with appropriate tools when it comes to MFF [EU budget] and recovery fund has come," she told reporters after the meeting.

Member states are divided over the size of the recovery instruments and whether the EU would provide loans, which need to be repaid by member states, or grants, to EU countries hardest hit by the crisis.

Dutch prime minister Mark Rutte, whose country is part of the so-called 'Frugal Four' along with Austria, Sweden and Denmark, has reiterated on Tuesday that the emergency should only provide loans.

The EU commission argues, however, that an asymmetric recovery, where some countries fall behind even further to others, would hurt all member states, and therefore grants are needed as well.

Regional ratifications?

But its not only the governments which need to bridge their differences to get a deal on the EU budget and agree on the recovery mechanism.

An increase of the own resources for the EU in the budget - von der Leyen earlier suggested to around two percent of the bloc's gross national income - needs to be approved by EU countries, including national and in some cases, regional parliaments.

National ratification could take a long time, while the recovery money would be needed for European economies at the earliest, with the bloc's growth expected to contract by 7.5 percent next year.

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EU leaders agreed on the need for a fund to support the recovery of Europe's economy from the coronavirus pandemic, but disagreed on details. The commission will come with proposals tied to the new long-term EU budget.

Macron and Merkel propose €500bn EU recovery fund

German chancellor Angela Merkel and French president Emmanuel Macron proposed on Monday a recovery fund of €500bn to support the sectors and regions in the EU most affected by the coronavirus crisis.

EU links access to recovery fund to economic advice

Most EU countries are now breach the common fiscal rules, as governments tackle the economic fallout of the coronavirus pandemic. The commission plans to link recovery funds to countries following its budgetary advice - but sanctions seem to be few.

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Italy and Spain, the worst-hit EU countries by the coronavirus pandemic, will get much of the new money under the European Commission's recovery plans - that mark a turning point for the bloc in moving towards joint debt.

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