The European Parliament and the Council were close to reaching an agreement on Thursday (29 October) on the rule of law conditionality attached to EU funds, but they continued to disagree on how to trigger the mechanism.
The respect of the rule of law in order to access EU funds is one of the main stumbling blocks in the budget talks between the Council, which brings together the 27 member states, and the Parliament. They also clash over the additional funds requested by MEPs for the multi-annual-financial framework (MFF), the EU’s seven-year budget.
The disagreement has delayed the approval of the €750 billion recovery fund and the €1.074 trillion long-term budget, against the backdrop of the worsening COVID-19 pandemic and the risk of a double-dip recession. The recovery funds are not expected until the second half of 2021.
A senior EU official said that the two sides were “close” to reaching an agreement on the rule of law, after the latest round of negotiations held on Thursday.
The Council made some concessions requested by the Parliament in terms of the scope. As a result, EU funds would be frozen in cases of corruption or conflict of interests, but a preventive function will also be added in case of a risk of breaching EU laws. In addition, the importance of the independence of the judicial system will be highlighted.
Expectations were high on Thursday. German Green MEP Daniel Freund said before the meeting that they were “getting close to a compromise”. But the Parliament said after the discussion that “everything is still to be agreed”.
The bone of contention is how to trigger the rule of law mechanism. The Council’s starting position was a qualified majority to approve a Commission recommendation to suspend EU funds, which would have allowed countries like Hungary and Poland to gather a blocking minority.
The Parliament initially defended a reverse qualified majority, which would have implied that the Commission’s proposals would pass unless a qualified majority opposed in the Council, making things harder for Budapest or Warsaw.
The Parliament and the Council are now exploring various avenues to narrow their differences. One of the ideas is to include a ‘non-activation clause’, under which Commission proposals will be adopted if the Council fails to reach a decision in a defined period of time, which is yet to be agreed.
This clause, however, is a ‘no-go’ for the Council. The Parliament’s political groups will discuss internally how to move forward, and the next round of talks will take place in November.
The Greens and Renew Europe are the groups pushing harder for a stronger Rule of Law mechanism.
The results of the negotiations, however, will find opposition in Hungary and Poland, who have threatened to veto the recovery fund if they are unhappy with the agreement.
The pair have already disagreed with expanding the scope of the mechanism to include the preventive function.
The 27 national governments and MEPs also clash over the additional money for the MFF. The Parliament has requested €39 billion more to reinforce 15 programmes, including Erasmus and Innovation (Horizon Europe).
In particular, the EU chamber requested €13 billion in fresh money, above the ceilings agreed by the EU leaders in July, to cover the interest payments of the recovery fund, given that the EU will borrow the €750 billion from the markets.
EU leaders rejected this month the idea of reopening the July agreement. Instead, they are ready to find up to €10 billion in “fresh money” from various sources, including the potential fines that companies would pay into EU coffers in the future, and to allow for moving unspent funds between programmes.
A senior EU official admitted that there is “a wide gap” on the top-ups to the MFF between the two institutions. The same source hoped that the Parliament “will use the next couple of days to look for ways out of the deadlock”, in order to find an agreement swiftly.
[Edited by Zoran Radosavljevic]