Charles Michel tables plan to break impasse on EU’s Coronavirus recovery fund and next long term budget

European Council president’s ‘new’ proposal focuses on funding elements around climate change, the rule of law and Brexit.
European Council Newsroom

By Martin Banks

10 Jul 2020

The plans were tabled by Michel on Friday just ahead of next week’s EU summit where leaders will try to reach a deal on the €750bn recovery plan and multiannual financial framework (MFF).

Next week on Friday and Saturday, the EU heads of state and government will try to reach a deal on the €1.85 trillion Recovery Plan: the €750 billion Next Generation EU recovery instrument and the revised €1.1 trillion long-term EU budget.

Speaking at a news conference, Michel told reporters that the aim was to target 30 percent of the funding on “climate related” projects, saying this was “important” for young people as well as meeting the EU’s own climate ambitions.

The revised package he is proposing also, crucially, carries possible sanctions for countries that do not respect the “rule of law” and what he called “European values”.

This falls into line with what many MEPs have been demanding since the European Commission first unveiled the recovery plan in June.

He said, “We need a strong link between EU funding and respect for the rule of law so I propose that there will be new budget conditionality linked to EU funds. This means that sanctions can be adopted in the event of any such deficiencies.”

“We need a strong link between EU funding and respect for the rule of law so I propose that there will be new budget conditionality linked to EU funds. This means that sanctions can be adopted in the event of any such deficiencies” Charles Michel

The Commission and Court of Auditors will, under his plan, “closely monitor” deficiencies. His proposal also foresees unspecified increased funding for “rule of law projects.”

Michel added, “On the rule of law, it is not our intention to close our eyes or keep our heads down. This issue is of fundamental importance to the EU’s future. This proposal will allow us to act on different fronts, including combatting discrimination and attacks on the media. The aim is to strengthen the rule of law with permanent monitoring of the rule of law in member states.”

“When it comes to the rule of law, conditionality means that member states (that do not respect rule of law) will face financial consequences.”

Another new element, he said, will be a €3bn “Brexit Reserve.”

He said, “Brexit, like the crisis, is very challenging and this reserve is to counter any unforeseen consequences of Brexit in member states, regions and specific sectors.”

Michel said that after the recovery plan was first tabled on June 19 he started bilateral talks with the EU27 leaders and met with MEPs.

He said, “I have identified six building blocks for a possible future agreement. We now need to find the right balance for a political agreement.”

The Commission would still be empowered to borrow via loans, a measure he calls “exceptional and a one off tool.” A balance of loans and grants would be preserved “to avoid over burdening member states with higher debt.”

Funds would go to those regions and sectors “most affected” by the crisis, with 70 percent being committed in 2021 and 2022 “according to the Commission’s allocation criteria.”

All funds would be dispersed by 2026, he said. His plans, if adopted, will give a stronger say for the Council in the disbursement of the new funds. “We need to find the right balance that is acceptable to everyone but also one that keeps the right level of ambition.

“ I think these new proposals today provide a strong basis for [reaching an agreement by unanimity]. We now need, in the next few days before the summit, to work hard to prepare the council and I know that we will have some difficult talks" Charles Michel

“In the talks I have had I have listened to everyone but, yes, we need a stronger role for the council to make sure everything is implemented.”

The so-called Frugal Four, Austria, Sweden, Denmark and the Netherlands, oppose the commission proposals and could yet scupper any deal.

When asked about the Frugal Four and if their opposition was “unreasonable”, he said, “My job is to make an agreement possible at the summit next week. But to do this we will need support and political courage.

“I respect the opinions of everyone, including the European parliament and national parliaments, and I understand the restraints in member states.

“That is why I have worked a lot and will, each day next week, will continue working hard to convince them (the Frugal Four). But, yes, I will listen to them.”

Looking towards the summit next week, he said, “By nature I am an optimist but I am also realistic and I do not underestimate the difficulties. Each prime minister needs to be responsible to his or her national parliament and we need to reach agreement by unanimity.

“But I think these new proposals today provide a strong basis for this. We now need, in the next few days before the summit, to work hard to prepare the council and I know that we will have some difficult talks.

“Now, though, is the time to act because we face an unprecedented crisis, the likes of which we have never seen before. But please do not under-estimate these proposals because I think they give a strong signal for EU leaders.”

He added, “The aim is not to burn money but to invest, reform and transform the EU by taking the climate and digital challenges more into account.”

Michel also said that any cuts in the MFF had to be considered in light of the “substantial amounts of money being mobilised” for the €750bn recovery fund. “The overall aim is for a more robust and better EU.”

“I realise there is strong opposition to some elements of the commission’s recovery package and MMF and this revised proposal is firmly grounded in the EU’s priorities – climate, digitisation and a stronger EU.

“The aim is to achieve convergence, resilience and transformation and repair the damage caused by the health crisis and to remodel our societies.”

Friday’s summit will be the first physical meeting of EU leaders since the start of the Coronavirus crisis.

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