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Blockade in the EU threatens to delay funding by the end of 2021

The European institutions resumed budget negotiations for the community club as of this Monday, but with very little hope of overcoming last week’s blockade. The head-on clash between the European Parliament and the Council of the EU (represented by Germany in its capacity as six-monthly presidency) over issues such as the monitoring mechanism to comply with the rule of law in the club leaves the launch of the new framework in the air EU financial institution (from 2021-2027) and the multimillionaire Recovery Fund that the countries hardest hit by COVID-19, such as Spain, yearn for.

The largest budget negotiation in the history of the Union faces discrepancies that range from the total amount of the accounts (totaling almost two trillion euros) to performance guarantees under the rules of the rule of law. Brussels still hopes to overcome the obstacles. But most sources believe that the agreement will not be sighted before the end of October, which could delay, at the very least, the entry into force of the new budgets beyond January 1 and the arrival of the Recovery Fund towards the end from 2021.

The new round of negotiations between the German presidency and the European Parliament, with the mediation of the European Commission, will start this Monday with the thorny chapter of the surveillance mechanism on compliance with the rules of the rule of law. On Wednesday, the three parties will resume haggling over the volume and distribution of the Financial Framework, abandoned amid mutual recriminations last week. And on Thursday, the European Parliament will recap the traffic jam and weigh the way forward. The capitals most affected by the possible delay of the Fund, such as Madrid and Rome, tremble and demand that the MEPs make an effort of flexibility. But the crash, for the moment, keeps all the accounts in the air.

The Council, under the leadership of Germany, has drastically reduced the scope of that project in order to overcome the rejection of countries such as Poland and, above all, Hungary. Berlin believes that the economic emergency caused by the Covid-19 pandemic forces it to sacrifice the scope of a mechanism that Angela Merkel’s government had vigorously defended in the past.

But Parliament refuses to accept the Council’s proposal, which, according to a parliamentary source, “is limited to establishing another audit control on the use of the funds without any real vigilance on the quality of the rule of law.” This assessment is shared by the four main groups in the chamber (popular, socialists, liberals and greens), which have closed ranks and have pledged not to put the approval of the Multiannual Financial Framework on the agenda of the plenary session until an agreement is reached. agreement on the monitoring mechanism.

That decision blocks sine die the implementation of the Financial Framework, an obstacle that politically slows down the recovery Fund from taking off, endowed with 750,000 million euros and with an estimated 140,000 million euros for Spain between subsidies and loans. “Just as we do not have to choose between health and the economy, we must not choose between the rule of law and the Recovery Fund”, warns the Socialist MEP Eider Gardiazábal, speaker at the processing of the jewel in the Fund’s crown, the so-called Recovery Facility and resilience, endowed with 672,500 million, almost half in non-refundable subsidies.

The crossfire of threats and vetoes is even more complicated because it also includes the so-called Decision on Own Resources, the essential legal basis for expanding the EU spending ceiling and allowing the issuance of debt that will finance the Recovery Fund. Sources familiar with the negotiation assure that some countries threaten to delay the ratification in their national parliaments of that decision to force Parliament to lower its demands on the monitoring of the rule of law. All fingers point to the Hungarian government of Viktor Orbán as the most willing to use non-ratification as a means of sabotage if the final agreement toughens the control mechanism.

Financial gap

Parliament demands that the scope of the mechanism be extended, in order to cut European funds not only for mismanagement of resources, but also for violating the fundamental values ​​of the EU. The European Commission, a strong supporter of the mechanism, has already denied grants to six Polish municipalities this year for having declared gay and lesbian-free zones. A warning for Poland and Hungary, two of the countries that benefited the most from the EU budget (with 86,000 million and 25,000 million euros, respectively, in the period 2014-2020). “There are plenty of arguments to overcome Orbán’s obstacle,” says a parliamentary source. “The German presidency of the EU has to do its job and achieve consensus in the Council instead of blaming Parliament for the blockade.”

The two institutions, Parliament and the Council, blame each other for the setback last Thursday, when both parties rose from the table in the seventh round of negotiations after just one hour of meeting. The demand of the MEPs to raise the spending ceilings of some items of the Financial Framework (of 1,074 trillion euros) ran into the round refusal of the German presidency, which only offered a slight redistribution of resources that would expand the margin by a few 9,000 million.

MEPs arrived at the meeting with a substantial cut in their financial demands. “From 40 programs that we wanted to increase we have dropped to 15 and from the total increase of 150,000 million euros to the position of the Commission [recortada en 23.300 millones]”, Said before the failed meeting the MEP of the ECR group (ultraconservatives) Johan van Overveldt, head of the Parliament team in the negotiation of the financial framework.

Negotiation sources point out that, despite the shock, this financial gap can be overcome. And they also consider it possible to reach an agreement on another of Parliament’s great demands: a binding calendar on the introduction of new own resources to finance the budget, that is, levies specifically designed to feed the coffers of the EU and, in this case, to finance the amortization of the new Recovery Fund.

Regarding the demand of the European Parliament to obtain new own resources, at the moment there is only agreement to introduce a tax on the consumption of non-recycled plastic, which is expected to come into force in 2021. But that rate would only report about 7,000 million euros a year and revenues will decline as plastic consumption is reduced. Parliament demands that, in addition to this tax, a part of the revenue from the CO2 emissions market be added next year. In 2023, a tax on imports from countries that do not comply with the reduction of emissions and a tax on large digital platforms. And, later, the most controversial taxes, relating to the financial sector (in 2026) and the harmonization of the corporate tax base (in 2026).

″ We do not have much time, but if there is will, there is enough time to close a good global agreement, “predicts the Socialist MEP Eider Gardiazábal. part of the Council ”, recognize community sources involved in haggling.