EU agreement on recovery plan by July ‘very difficult’, officials warn

European Council President, Charles Michel, during the EU leaders' teleconference on 23 April. [Council]

It will be “very difficult” to reach an agreement on the recovery fund and the EU’s overall seven-year budget by July, as intended, given the disagreements over the size, the distribution of the stimulus and the attached conditions, EU officials and national diplomats acknowledged on Wednesday (10 June).

Time is of the essence, everybody agrees, as the EU faces the deepest recession in its seven-decade history, triggered by COVID-19.

To counter the economic fallout of the pandemic, the European Commission proposed in late May an unprecedented €750 billion recovery fund – mostly made up of grants – that is the largest stimulus ever planned by the bloc.

Von der Leyen proposes €750 billion stimulus under member states’ grip

European Commission president, Ursula von der Leyen, proposed on Wednesday (27 May) an unprecedented stimulus of €750 billion, mostly through non-refundable grants, with governments having a crucial role in deciding how the money will be spent.

The EU executive also updated its long-term budget, the Multi-annual Financial Framework (MFF) for 2021-2027.

“It would be very good to have a political agreement in July,” admitted Commission Vice-President for Economy Valdis Dombrovskis, after the Ecofin Council last Tuesday.

But this is set to be a Herculean task.

European Council President Charles Michel has contacted EU leaders to sound out their opinions on the Commission proposal.  

Following this first round, an EU official told EURACTIV that it would be “very difficult” to reach the necessary unanimity of the 27 leaders before the summer break.

EU leaders already failed to seal a deal on the budget in February, as the differences between Northern, Southern and Eastern member states were impossible to overcome despite various proposals on the table. 

The coronavirus only widened the gap further among the national capitals.

The updated MFF and the recovery fund have been especially questioned by the Netherlands and Austria, as well as Eastern countries like Hungary. 

An EU official, however, pointed out that every member state has raised some “issues”, as everybody is trying to maximise their interests. 

The main bones of contention are the size of the fund, the distribution between loans and non-refundable grants (a total of €500 billion is foreseen in the Commission proposal); and the distribution key for allocating the money. The capitals also disagree over the conditionality attached to unlock the funds via national recovery plans they should put forward. 

EU recovery funds will come with strings attached 

The EU’s unprecedented stimulus to recover from the COVID-19 pandemic will come with certain conditions which should reflect the extraordinary nature of this crisis and the European goals, senior MEPs and diplomats have said

For countries like the Netherlands, the list of objections is even longer, an EU diplomat said.

The Hague questioned setting up new EU taxes, such as a single-plastic tax, as part of the package to finance the fund. It also disagrees with the calendar foreseen to reimburse the EU debt issued to finance the fund, and wants an alternative to the opaque ‘comitology’ procedure to involve the member states in the management of the recovery fund.

Countries including Italy, Spain, France and Portugal are showing a more “constructive” position, a Spanish official said. But still, reaching a consensus by next month would be “very complicated”, the official added.

Part of the difficulty lies in the immense amount of information that the capitals must digest. The package put forward by the Commission two weeks ago includes 22 proposals, covering expenditure plans for all major EU policies, including the massive envelopes of the Common Agricultural Policy or Cohesion. 

The Netherlands says it would not be ready to talk about specific figures for the fund until the middle of July.

If a political agreement is signed by next month, there would be sufficient time to complete the national ratification procedures in the 27 member states in the second half of the year, in many cases through their parliaments, so money could start flowing to the hard-hit regions early next year.

How EU member states reacted to the Commission’s Recovery Fund proposal

Most EU member states have reacted positively to the European Commission’s €750 billion  Recovery Fund proposal, which aims to help the bloc cope with the devastating economic implications of the pandemic.

In order to speed up the technical work, EU ambassadors are meeting three times this week. In addition, finance ministers are also discussing the recovery package twice this week, in the Ecofin format on Tuesday and in the Eurogroup on Thursday.

On 19 June, EU leaders will discuss the recovery plan for the first time since the Commission put forward its proposal, although the videoconference format will limit the debate and exclude any real negotiation.

Once the EU leaders express their views, an EU source said Michel plans to present a negotiating box in the following days to try to bridge the national positions. 

Afterwards, he will convene a summit in Brussels around 9 or 10 July, the first face-to-face gathering of the EU leaders since the confinement measures were adopted in March. A second summit in late July could be convened, if necessary, an EU official said. 

Despite the major obstacles, the willingness to reach an agreement as soon as possible is widespread.

“Although there remain differences between various nations that are not small, I have the impression that everyone has the will to reach an agreement within a short time,” said Germany’s Finance Minister Olaf Scholz.

[Edited by Zoran Radosavljevic and Sam Morgan]

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