The possible budget blockade poisons the EU leaders summit

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Officially the budget negotiation is not on the agenda of the Summit of Heads of State and Government of the European Union this Thursday and Friday in Brussels. However, the threat of blocking Poland and Hungary of the own resources ceiling with which to finance the new recovery fund of 750,000 million -for their refusal to accept the conditionality of aid to respect for the rule of law– and the requirement of more fresh money of the European Parliament for the new budget 2021-2027 – endowed with 1,074 billion – threaten to poison the third face-to-face summit of community leaders since the outbreak of the pandemic.

The President of the European Council, Charles Michel, He has not planned any debate and his team insist that it is “premature” to raise it because the interinstitutional negotiations between Council and Parliament. But various delegations assume that it will be impossible to avoid the discussion. First of all, because the first politician to speak this Thursday will be the President of the European Parliament, David Sassoli, during the traditional exchange of views with European leaders.

The negotiators of the European Parliament remain dissatisfied with the proposals of the German presidency of the EU – which negotiates on behalf of the Twenty-seven – and demands a spending increase of 39,000 million. According to their accounts, this additional item could be achieved by increasing the net budget ceiling at 9 billion, taking out of the spending ceiling 13,000 million in interest from the recovery fund as well as other unused resources.

Controversy over the figures

The German presidency of the EU has rejected these figures and has warned that they would shoot the budget at 90 billion. An amount that the Eurocamara has lit this Wednesday. “They inflate the Parliament’s figures to present us as unrealistic and unreliable,” the MEP reproached Johan Van Overtveldt, accusing Berlin of spreading distorted information and wanting to get the money out of the margins and the flexibility of the budget that should be used for contingencies.

Despite the poisoned environment, the field of discussion seems a priori quite limited. All the diplomats consulted insist that raising the spending ceiling would mean reopen the agreement of last July 21 and put the whole package at risk: the multiannual financial framework for the next seven years, the recovery fund, he own resources ceiling and the conditionality of funds regarding the rule of law. “There is no margin to go further. What the European Parliament wants is not possible”, ditch a diplomat from northern Europe. And he insists that the only possible way is to find the resources in the margins of the budget without increasing the spending ceiling.

Spain satisfied with the pact

“The leaders spent five days to reach an agreement that cost blood, sweat and tears. Spain’s position is that the debate cannot be reopened,” Moncloa sources agree, concerned about the consequences of a blockade for the arrival of the 140,000 million allocated to Spain and satisfied with the balance achieved in July. “To achieve the key agreement for recovery, sacrifices had to be made in the multiannual financial framework. Everyone in Parliament knows this. We will have to look within the agreement to accommodate the wishes of governance and the amounts within the current ceiling because we cannot walk now, for 10,000 or 15,000 million in this kind of ocean of figures en that we move [de un billón y pico], blocking something on which the exit from the crisis depends a lot “, assure diplomatic sources in Brussels.

In addition to the budget amount andThe great stumbling block is conditionality. For the instrument for recovery and resilience, the main pillar of the fund, to come into force, the 27 parliaments need to unanimously ratify the own resources ceiling and Poland and Hungary have made it clear that they will not do so if aid is conditioned. The problem is that without a powerful mechanism to fight corruption or misuse of funds, the Nordic countries and the Benelux will not accept the agreement either.

The keys to the pact

Multiannual financial framework: The central pillar of the agreement reached in July by the Twenty-seven is a budget for the period 2021-2027 of 1,074 billion euros that, to be approved, requires the consent of the European Parliament, which has the capacity to approve or knock down the accounts. A procedure in which you are not willing to give in without anything in return. MEPs are demanding an increase in the spending ceiling of 39,000 million euros to finance 15 European programs, ranging from Erasmus + to the Horizon or health.

Conditionality of aid: The pact includes a mechanism to condition the disbursement of European funds to the respect for the rule of law. The German compromise proposal under negotiation focuses on ensuring the proper functioning of the funds. Parliament and some northern countries and the Benelux want a more effective instrument. Hungary and Poland meanwhile flatly reject conditionality because they fear being affected.

Recovery fund: The launch of the great fund of 750,000 million agreed to face the socioeconomic consequences of the coronavirus pandemic is the great novelty in this year’s fiscal year, although its implementation depends on the approval of the new capital ceiling -unanimously and that Hungary and Poland threaten to block-, the Decision authorizing the European Commission to borrow on the markets.

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