Summit fails to narrow differences over EU’s seven-year budget

Dutch Prime Minister, Mark Rutte, speaks to reporters in the European Council. The Netherlands is part of the "Frugal Four", the net contributors against increasing the size of the budget. [Consilium]

EU leaders broke off in the early hours of Friday (21 February) after failing to make significant progress on the bloc’s expenditure for the next seven years. They will reconvene at 10 am this morning to try and make a breakthrough.

Leaders arrived in Brussels on Thursday afternoon to try and reach agreement on the bloc’s finances for 2021-2027, the so-called multi-annual financial framework (MFF). 

Major differences remained at the start of the summit in several areas, ranging from the budget’s expenditure ceiling, the priority areas for funding, and the rebate some net contributors were asking for.

In the light of those disagreements, European Council President Charles Michel decided to launch a new round of bilateral consultations with the 27 heads of states after 8 pm.

After midnight, Michel’s spokesperson announced that the leaders’ plenary would only reconvene at 10 am on Friday. Bilateral talks continued through the night, as Michel had only managed to speak to half of the 27 EU representatives by midnight.

EU's big budget battle

Leaders of the EU27 hold a special summit to debate the bloc’s 2021-27 budget, in an effort to meet the tightening deadlines, fill the financial gap left by Brexit and reconcile vastly different positions of the member states.

It was not clear on Thursday evening if Michel would propose a new “negotiating box” on Friday or put forward some modified parameters for national envoys to work on and develop further at a later stage.

In the EU summit press room, word was already starting to circulate that another summit could be convened in early March to try and break the stalemate.

EU sources told EURACTIV that Michel’s only plan before the meeting was to reach an agreement at the meeting, which is open-ended and could be prolonged if a deal is within sight.

However, EU leaders made clear on their way in that an agreement would be extremely hard to achieve in a single meeting. And, indeed, they largely stuck to their guns.

The Netherlands, Austria, Denmark and Sweden – a group of net contributors called the ‘Frugal Four’ – continued to reject proposals to raise the EU’s expenditure beyond 1% of the bloc’s Gross National Income.

This amounts to a bit more than €1,000 billion over the next seven years. Michel proposed expenditure of €1,094 billion (1.074% of EU’s GNI).

“It is very clear that the member states are far apart from one another,” said Swedish prime minister Stefan Löfven.

Meanwhile, Michel’s budget proposal was criticised as insufficient from countries sitting on the opposite side of the fence – the net beneficiaries of Southern and Eastern Europe which largely benefit from the bloc’s farming and regional policies. Those two policy areas were cut by 14% and 12% under Michel’s plan.

Spanish Prime Minister Pedro Sánchez described Michel’s proposal as “highly disappointing,” not only for Spain but for the EU as a whole. According to him, Michel’s draft negotiating box is even “worse” than the proposal put forward by Finland during its Council presidency in December.

Meanwhile, France criticised the proposal for failing to heed the bloc’s aspiration for renewed geopolitical might after Brexit. “We cannot agree on a number of ambitions and then, the day we need to agree on the resources, say we are not there,” President Emmanuel Macron argued.

EU budget: First post-Brexit test seems to be tough for Europe

In today’s edition of The Capitals, find out more about how the EU member states reacted to European Council President Charles Michel’s more ‘flexible’ EU budget proposal.

“A colleague asked me what is the good position between the Frugal and the more ambitious countries. I said Luxembourg,” Prime Minister Xavier Bettel told reporters at his arrival to the summit. “That is to say: be ambitious but we have to be careful because it is public money and we have to take care of it,” he added.

The so-called frugal four were negotiating as a block, EU sources confirmed, and they fought not only to limit the payments ceiling to 1% but also to maintain their rebates.

A senior EU official who briefed journalists before the meeting made clear that the two were incompatible. “Sweden and the Netherlands have outsized rebates,” the official pointed out, saying the European Commission had proposed phasing out all rebates in the wake of Britain’s departure from the EU.

If some form of rebates is maintained, they would need to be degressive and fully transparent, the official said, suggesting they could take the form of a “lump sum” instead of complex calculations that make the current rebate system “a jungle of intransparency”.

An EU source confirmed around midnight that all controversial issues continued on the table, including the expenditure ceiling, the priorities, the rebates and the new rule of law conditionality to access EU funds.

Meanwhile, European Parliament President David Sassoli made it clear that MEPs will very likely reject the current proposal for a multi-annual budget.

He said: “I must warn you that the European Parliament will not accept just any agreement. A very large majority of MEPs are prepared to reject any proposal which fails to take into account Parliament’s position.”

Parliament ready to flex its muscles over EU budget in wake of Brexit

Ahead of an EU27 summit on Thursday, the European Parliament is mounting pressure on the member states to agree on an ambitious budget for the bloc, demanding a bigger say in decision-making in the aftermath of Brexit and threatening to reject the bloc’s key financial instrument.

[Edited by Frédéric Simon]

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