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23rd Jan 2021

EU Parliament sticks to demands in budget tussle

  • MEPs Jose Manuel Fernandes (l), Valerie Hayer, and Jan Van Overtveldt (r) are all part of the parliament's budget negotiating team (Photo: European Parliament)

No breakthrough emerged on Monday (5 October) in the negotiations between European Parliament and the German EU presidency on the bloc's seven-year budget and coronavirus recovery package.

"We are coming into a crucial phase," Belgian MEP Johan Van Overtveldt told reporters, after this sixth round of talks.

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He pushed back against accusations that the parliament is dragging out the process, while both the budget and the recovery fund need to be operational from next year.

"Don't blame the parliament, that it is our fault that things are going at a too slow pace," said Van Overtveldt, who is leading the parliament's team.

The parliament seeks a top-up to 15 programmes in the EU budget that focus on innovation and "future-oriented" investments, MEP Jan Olbrycht said.

The council, meanwhile, has said there is very limited room for manoeuvre, since EU leaders agreed on the figures of the budget in July at their crunch summit.

Olbrycht said the parliament reduced their demands from 40 such programmes to 15 - but it refused to prioritise among those.

MEPs proposed not to include the financial interest on the financing the recovery fund in the budget, which could mean €12.8bn extra for the programmes. Overall, the parliament wants €38.5bn extra for key programmes - which is less than their initial request of around €100bn.

However, it will be difficult to adjust any of the numbers in the budget to that extent, since EU leaders fought over the specific items for five days in July at a fraught summit, including having the financial interest in the budget.

The parliament also wants to see legally-binding commitments from member states on dates for introducing new EU levies, such as the digital tax, the financial transaction tax and carbon tax.

The parliament says it is worried that without it, EU citizens could end up paying the bill for the recovery fund.

Member states are reluctant to agree on more specific dates since the leaders' July agreement already includes some dates, and a list of levies the commission needs to work out.

Rule of law

One of the key political hurdles remains the rule of law conditionality attached to the disbursement of EU funds.

Some member states, and the parliament, want to see the specific mechanism finalised before they give the green light to the budget and recovery package.

Making things more complicated, the details of the mechanism itself are not part of the budget negotiations, but need to be hammered out in a different negotiation between leading MEPs and the German EU presidency, which last week came forward with a compromise proposal.

"We would not close the MFF (multi-annual financial framework, ie budget) and 'own resources' negotiations, unless we made significant progress on rule of law point, as the heads of political groups made it clear to the German presidency," liberal MEP Valerie Hayer, who is also on the parliament's negotiating team, said.

She also warned the German presidency's proposal needs to be improved.

Referring to Hungarian prime minister Viktor Orban, who rejects any strong rule of law mechanism and also called for the resignation of EU commission vice-president Vera Jourova last week, Hayer said "these provocations, all they are doing is strengthening our determination on this point".

Dutch prime minister Mark Rutte, who wants a strong rule of law conditionality, said he hoped the parliament would fight for an effective tool.

"I find it more than ironic that the Dutch prime minister who in the past said regularly degrading things about the European parliament now very actively is soliciting the support of the parliament on his vision of the rule of law," quipped Van Overtveldt.

Negotiations on the rule of law file have not started yet. "There is the expectation that rule of law would still take place this week," an EU source said.

The budget negotiators will sit together next Thursday and focus on the possible top-ups.

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.

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

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.

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.

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.

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