The European Parliament on Monday (7 September) requested to bolster the EU’s seven-year budget with around €110 billion and legally binding commitments on the introduction of new levies to finance the bloc’s €750 billion stimulus against the COVID-19 crisis,.
MEPs held a new round of talks yesterday on the EU’s long-term budget for 2021-2027 with the Council of Ministers, the institution representing the EU’s 27 member states.
Known as the multi-annual financial framework, or MFF, the budget discussions focused on new own resources to finance the recovery fund that was put in place by EU leaders in July to fight the ongoing economic crisis caused by the pandemic.
The European Commission also took part in the three-way budgetary talks.
Negotiators are racing against the clock, with an objective of getting the first EU money flowing as of 1 January. But sources close to the negotiation said that the discussions were “constructive” even though they were “quite intensive”.
The two sides discussed topping up the €1,074 billion MFF and the governance of the Recovery and Resilience Facility, the main pillar of the €750 billion recovery fund, which are both part of the July deal worth €1.8 trillion in total.
Leaders of the 27 EU countries finally compromised on a €1,074 billion long-term budget and recovery fund instrument early on Tuesday (21 July) morning, but it took one of the longest-lasting summits in European Council history and the final deal cut funding for some of the bloc’s key priorities.
Negotiators also exchanged views on green aspects of the EU budget deal, including a commitment by EU leaders to ensure that 30% of the bloc’s funds are dedicated to climate-friendly projects.
One of the main bones of contention is a Parliament request to bolster the EU budget to finance areas like the Erasmus education programme or Horizon Europe, the EU’s innovation and research programme.
Parliament sources said that their priority is to discuss “content” and priorities, and they did not put on the table any figure. But officials estimated that their demands amount to €110 billion.
“The room for manœuvre is very limited on this,” said a Council official.
Representatives of EU member states believe that the Parliament’s demand is hard to swallow, considering that the EU has now the biggest-ever volume of funds available (€1.8 trillion) after the July marathon summit.
The European Parliament will adopt a critical stance against the European Council’s recovery plans on Thursday (23 July), opposing cuts to EU-funded programmes in the bloc’s long-term budget while also hitting out at the alleged ‘weak’ nature of rule of law conditionality.
Another outstanding issue is how to pay for the €750 billion corona-stimulus. The Parliament is pushing for a legally-binding declaration by member states on the introduction of new levies and taxes to finance the unprecedented amount that the bloc will borrow from the markets.
But a Council official said it was “a big ask” to request a legal commitment when there are no formal proposals from the Commission on the table.
“You wouldn’t buy a car you haven’t seen,” the Council official said, referring to the lack of clarity on the carbon border tax project, or an expanded Emission Trading System, the EU’s cap-and-trade scheme for greenhouse gas emissions.
Instead, member states are ready to explore ways of beefing up the wording used by EU leaders in their July agreement, which included a timetable to introduce new levies.
On the bright side, EU sources said an agreement would be easier to find on the governance of the recovery fund. Experts from both sides will try to find a formula to give the Parliament a bigger say in this area, the sources said.
The European Parliament will only give its consent to a new EU long-term budget if the basket of own resources is increased to pay for the recovery fund, the main political groups warned in a letter addressed to EU leaders ahead of Friday’s (19 June) summit.
Hungary pushing for package deal
The Council also insisted that the MFF and recovery fund should come as a package, because part of the recovery money will be channeled through the EU budget. The Austrian rebate for instance, which was key to win Vienna’s approval in July, is based on grants approved in the recovery fund, sources said.
The Parliament however wants greater negotiating space to beef up the MFF. For that reason, MEPs suggested to reach an agreement now on the recovery fund (‘Next Generation EU’) and the EU’s new budgetary ceiling that will be put in place to finance it. That, in turn, would allow more time to negotiate higher figures for Erasmus and Horizon Europe.
The Parliament’s chief negotiator and chair of the Budget committee, Johan van Overtveldt (ECR, Belgium), declined to comment at this stage. But we understands that the Parliament is willing to accelerate negotiations on the recovery fund in order to allow enough time for national parliaments to approve an increase in the EU’s spending ceiling to finance the stimulus.
Parliament sources recalled that there’s no legal obligation to negotiate the MFF and the recovery fund together, and it is rather “a political link”.
A major political stumbling block in this regard is the Parliament’s insistence to make the disbursement of EU funds conditional on the respect for the Rule of Law.
Hungarian prime minister Viktor Orban succeeded in watering down those “conditionality” rules during the July summit. And Budapest is now pushing to negotiate the Rule of Law clause as part of a wider package in order to prevent MEPs from tightening up the text during budgetary talks.
That would give the Hungarian parliament an effective right of veto over the whole €750 billion recovery fund if MPs dislike the Rule of Law text.