EU leaders tell Member States it is ‘essential’ to agree on budget and recovery plan at summit

At least four Member States, “the Frugal Four”, remain opposed to the package, but the leaders of the main EU institutions have ratcheted up the pressure to reach an agreement in a week’s time.
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By Martin Banks

09 Jul 2020

On Wednesday, Commission President Ursula Von der Leyen met with her Council and Parliament counterparts, Charles Michel and David Sassoli, along with Angela Merkel, the German chancellor whose country has just taken over the EU presidency.

Afterwards, the four leaders issued a statement which said it was “essential” that the summit agrees on the fiscal package “in order to allow the interinstitutional negotiations to start.”

They said economic forecasts for the coming months point to a “severe” recession and that the crisis will have “deep social impacts.”

“Swiftly” reaching an agreement on an “ambitious” European recovery package “is the EU's highest priority” but will “require strong coordination.”

“We are on the eve of important events and we cannot fail to deliver. Millions of European citizens, who have suffered and continue to suffer from the serious economic and social consequences of the pandemic, are looking to us” David Sassoli, European Parliament President

EU leaders will meet physically on 17 and 18 July in a bid to forge agreement on the twin deal. The next few days will see a flurry of informal meetings between Michel, Merkel and other EU leaders in a bid to clear the way for a deal next week.

MEPs’ consent is also needed for the still-to-be-agreed €750bn Coronavirus recovery plan, called Next Generation EU, and the EU’s next seven-year 2021-2027 budget, the MMF and, in a speech in Parliament on Wednesday Merkel said she takes the assembly seriously as a co-legislator.

She also told members, “Our common goal is to reach an agreement as soon as possible. I hope that we can reach an agreement this summer.”

Michel has indicated that the MMF will have to be cut, a move opposed by many MEPs and by von der Leyen who, also speaking in Parliament on Wednesday, urged everyone to “not neglect the MFF.”

She said, “Next Generation EU is for the acute crisis - but the MFF is here to stay, it is the most important tool to implement our long-term goals.”

The “Frugal Four” - the Netherlands, Austria, Denmark and Sweden - want the EU to decide by unanimity whether or not to disburse grants and loans from the recovery fund to countries in need.

The Netherlands, which has taken a lead in opposing the plan, says grants, the Commission’s preferred choice of financing the package, are “undesirable and that it does not support issuing joint debt for them.

Other aspects of the package still need to be agreed, including proposals for the governance of the recovery fund and also how countries’ access to the huge recovery pot is controlled.

Another issue, flagged by MEPs mostly, is that funds for Member States under the next MFF must be conditional on their respect for the rule of law.

In a plenary debate on Wednesday with Michel and EU Commissioner Maroš Šefčovič, most MEPs said the Commission’s proposals for the recovery package and a revamped long-term EU budget are the “bare minimum” that is acceptable for Parliament.

MEPs also demanded a “proper” repayment plan, including several new “EU Own Resources” - sources of revenue - like a digital tax or one based on the Emissions Trading System (ETS), to avoid citizens having to pay back the recovery debt.

Several members insisted that conditions attached to the recovery funds must not result in new austerity measures.

“Next Generation EU is for the acute crisis - but the MFF is here to stay, it is the most important tool to implement our long-term goals” Ursula von der Leyen, European Commission President

Reflecting current sharp differences at national level, some MEPs said the whole package amounts to a “meagre 1.5 percent” of the EU’s GNI but others said the size of the package was too big and deplored that the EU would be taking on debt.

MEPs warned that “a deal in the Council [next week’s summit] is not the final deal” as Parliament “stands ready to negotiate.”

Sassoli said, “We are on the eve of important events and we cannot fail to deliver. Millions of European citizens, who have suffered and continue to suffer from the serious economic and social consequences of the pandemic, are looking to us.”

“To achieve this, powerful instruments are about to be put in place: the next long-term EU budget and the Next Generation fund to help reconstruction from a new economic and social base.”

“For Parliament, the Commission proposal is not a point of arrival, but the minimum basis from which to start. Germany understands well the importance of European solidarity. The presidency priorities go in the right direction.”

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