EU leaders hit a dead end during the first round of the European Council meeting on Friday night (17 July) after The Netherlands clashed with Italy and Spain over the governance of the planned €750 billion EU recovery fund.
Talks on the €750 billion fund to support countries suffering from the economic fallout of the coronavirus pandemic had reached a stalemate when they broke up close to midnight. President Charles Michel wanted to resolve the outstanding issues with the architecture first, and talk about numbers later.
However, everything will be back on the table tomorrow, although Michel is not expected to come up with a new ‘negobox’, but instead with minor changes to his original proposal.
The Hague is willing to support economies hard-hit by the pandemic but with the EU planning to create common debt to do so, they want strong control over the beneficiaries’ investment and reform plans.
The Dutch insist on safeguarding their right to veto the disbursements of EU cash if they disagree with the reform plan presented by countries wanting to access the fund or if they do not comply with it.
This is highly controversial for countries like Spain, Italy or Greece who have painful memories of the eurozone crisis. A number of countries also fear potential vetoes could delay the much needed help.
According to Michel’s proposal, for countries to access the so-called ‘Recovery and Resilience Facility’, they would have to present national reform plans based on the Commission’s country-specific recommendations in line with the European Semester.
Based on the assessment of the EU’s executive body, the Council would have the last word on whether to unlock the cash. For plans to be approved, a qualified majority vote in favour would be required. The Netherlands wants unanimity.
A paper circulated during the meeting proposed an alternative, the so-called “emergency break.” This would allow an undefined number of countries to bring the question of payments to the European Council if they believe a country is making “a serious deviation” from the plan agreed with the Commission.
The question remains how many countries are needed to trigger this clause. Asked by journalists whether the country was alone on this at the end of the meeting, Prime Minister Mark Rutte admitted: “it is getting lonely.”
An EU official said ahead of the meeting that nothing is agreed until everything is agreed. Leaders are still sticking to their red lines, unanimity is required to reach an agreement and the impression after the first round of negotiations is that everything is still open.
According to EU sources, everything from the size of the EU long-term budget and the recovery fund to the share of loans and grants as well as the criteria for the allocation of the money and the link to the respect of rule of law was discussed. However, important differences remain.
At the end of the night, Austrian Chancellor Sebastian Kurz questioned, again, the volume of the recovery instrument and openly rejected the €500 billion of grants in the recovery fund proposed by the Commission as “a transfer union.”
Negotiations started around 11 am, the meeting broke up at 6 pm and was followed by rounds of bilateral meetings.
Though leaders highlighted the “historic” moment and European Commission president Ursula Von der Leyen warned that “the whole world was watching,” leaders will now resume the discussions on Saturday morning.
[Edited by Benjamin Fox]