Parliament pushes for easing recovery fund conditionality

European Parliament rapporteur on the Recovery and Resilience Facility, Eider Gardiazabal.

The European Parliament will fight to loosen the conditionality required from national governments in order to receive money from the EU recovery fund, according to the negotiating position MEPs will adopt in the coming days.

The four biggest political groups – the European People’s Party (EPP), the Socialists (S&D), the Liberals and the Greens – reached an agreement last Friday (30 October) on the details of the Recovery and Resilience Facility, the main pillar of the EU’s €750 billion recovery fund.

This new facility will mobilise up to €672.5 billion in loans and grants to support member states investment and reforms proposals to tackle the impact of the COVID-19 crisis.

The four groups’ backing will secure enough votes in the Parliament’s Economic and Monetary Affairs committee on 9 November, and the plenary session in mid-November.

Once the Parliament’s proposal is adopted, MEPs will enter into negotiations with the Council, representing the EU27, to agree on the details of the facility. 

Both sides hope to reach an agreement this month. But the recovery funds will not be transferred to member states until the second half of 2021, as national parliaments have to authorise the borrowing needed to finance the recovery instrument.

EU countries warm up recovery fund engine

In today’s Special Edition of the Capitals, find out more about EU member states’ priorities when it comes to their national recovery plans which were supposed to be submitted to the European Commission on Thursday (15 October), as well as so much more.

The most controversial issue is the conditionality that EU governments need to fulfil to access the recovery funds.

The Council requested that the Commission’s evaluation of the plans should take into account recommendations related to the Green and Digital agenda, the EU’s big priorities, but also fiscal aspects, and whether the national plans are “expected to effectively contribute to strengthen the growth potential, job creation and economic and social resilience of the member state, mitigate the economic and social impact of the crisis and contribute to enhancing economic, social and territorial cohesion”.

The Parliament, however, maintains that member states’ investment and reform plans need to follow only those recommendations that are relevant to overcome the impact of the pandemic, under six priorities: Green agenda, digital transition, social cohesion, industrial strategy and SME support, modernisation of Public Administration, and Youth. 

The Parliament’s rapporteur, Eider Gardiazabal (S&D, Spain), argued that their position on the Recovery and Resilience Facility “is more concrete, more social, greener and more flexible” than the Commission and the Council’s proposal. 

“More social, because it allows funding for the European Pillar of Social Rights, and places a very important weight on gender policy. Greener, because we have increased the investment target in the fight against climate change to 40%, and more flexible with the participation of the European Semester,” she explained.

The Parliament also scrapped the possibility of suspending the disbursement of the recovery funds if member states incur a serious violation of their deficit and debt reduction targets under the Stability and Growth Pact.

The Council included a clause (Article 9) which foresaw this possibility, in line with the Cohesion Funds rules, although it would be inoperative at least until the end of 2021, given that the Stability and Growth Pact is suspended while the pandemic is ongoing. 

Gardiazabal explained that “it is not the right time now to think about macroeconomic conditionality”, given that the EU’s fiscal rules are paused and the Stability and Growth Pact is in the process of being reviewed.

Prefinancing 

The Parliament also doubled to 20% the prefinancing that member states could access from their recovery funds envelope once their national plans are received by the Commission. 

The Recovery and Resilience Facility is one of the three ongoing negotiations between the Council and the Parliament to launch the big economic stimulus against the COVID-19 pandemic.

Both sides are close to finding an agreement on the Rule of Law conditionality that will be attached to the EU funds. A deal could be reached during the next round scheduled for Thursday.

Parliament and Council near agreement on rule of law conditionality

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 MEPs and the member states are, however, finding more difficulties to progress on the multi-annual financial framework (MFF), the EU’s seven-year budget totalling 1.074 trillion. The Parliament requested extra funds for 15 programmes cut by EU leaders last summer, including €13 billion of ‘fresh money’ to cover the interest payments of the recovery fund. 

The Council is only open to consider reallocating unspent funds towards these priority programmes, such as Erasmus, health or innovation.

[Edited by Zoran Radosavljevic]

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