The outcomes of the extraordinary EU-27 summit (17-21.07.2020) are still being discussed in the EU’s capitals. Some winners and losers have appeared already through political dialogues; the European integration has always been about giving some states advantages setting others –for a while- in a backward position, though not visible from the start.
In legal sense, final decisions about both the MFF-27 and the “next generation’s” recovery package (with the new “divided figures”: €390 bn in grants and 360 bn in loans) have not been reached so far; both the budget (mainly, the new “own resources”) and the package shall be agreed in the Council of Ministers by qualified majority voting and ratified by the member states.
All final steps will be taken somewhere after the end of summer holiday, i.e. probably, in the beginning of September. However, several member states are in more urgent need than others to get the highly desired EU money (e.g. Hungary, Poland, southern countries, as well as the Baltic States). In finalizing the process, a couple of distinct approaches have appeared…
A battle of words…
Several member states’ leaders have noted the necessity to specify “conditions” on the prolonged MFF’s framework and the recovery fund including unspecified terms like the rule of law, governance and qualified majority voting.
Besides, there is a clear political commitment that the head of states have kept in mind (both while at the European Council and afterwards) that these priorities will remain at the discussions after summer vocations (as the Council President Charles Michel noted, “there is not yet complete clarity about the procedure”).
Most probably, in a second round of “final debates” some states would raise issues concerning rebates: e.g. Denmark and Sweden (joined by Austria and the Netherlands) already asked for bigger rebates; “technically”, they were asking for a new calculation method concerning the national contributions and the “own resources”. These so-called “frugal states” are asking for a fixed 2 percent deflator for the rebates, rather than following the current system using real inflation figures; some say that would be a good deal under the assumption that the latter stays below the 2 percent of GDP goal.
Note: previous articles in EII have mentioned positions of these states.
As a result of the July-2020 summit’s agreement, the European Commission has acquired competence to borrow on the global financial market € 390 billion to hand out agreed grants’ volumes to the regions, businesses and industries worst hit by the pandemic crisis. This decision was at the start described as a “monumental leap forward in European integration” by the Council President Charles Michel and a federalist MEP Guy Verhofstadt, to name a few. However, “the European borrowing” will have serious implications for the member states in seven-ten years’ time and in a distant future.
Winners & Losers
Somehow, some “winners” have already appeared in the first place: these are such countries as Italy, Spain, Hungary, Poland, etc. For example, Italian PM has secured vast sums of grants and loans from the rescue package (called “next generation EU”) despite being the EU’s third-largest economy. Italy stands to receive € 209 billion, or 28 percent of the total package, of which € 81billion will be in grants and €127 billion in low-cost loans. The country’s PM, Conte said the cash had “the power to change the face of the country”.
Another winner, Spain is the country that became the second-largest recipient of aid after Italy, with a €140 billion package of loans and grants. Prime Minister Pedro Sanchez ensured future governments would have to pay back less than half of that amount after securing €72.2billion in grants, which is the biggest share of cash heading to a EU country worst-hit by coronavirus. Spain, which has recorded a death toll of over 28,000, is expected to see its economy shrink by 10 percent. According to Sanchez the summit showed “the most brilliant pages in the EU’s integration history”.
Besides Italy and Spain, two other states are regarded as winners, i.e. Hungary and Poland. Some experts say that “a backroom deal” between Hungarian PM Viktor Orban and Angela Merkel represented a “shady era” in the EU politics.
The two states are facing Treaty’s Article 7 procedures, the bloc’s disciplinary measure, but German Chancellor agreed to bring the processes to a close by the end of the year. This came after Budapest and Warsaw threatened to veto the entire summit while other capitals demanded strings for access to the cash linked to good behavior. The EU-27 finally agreed that a weighted majority of governments can block payments to a country on rule-of-law grounds.
As to the “losers”, Ireland is regarded a big loser in the recovery package, i.e. the Irish new Prime Minister Michael Martin conceded his country’s agreement to become a net contributor to the coronavirus aid package. With a population of less than five million, Ireland will contribute about € 18.4 billion to the new scheme, while receive back only about € 3.2 billion. However, the country regards it as a sign of solidarity: “It has been a long summit and a challenging summit,” Mr. Martin concluded after the summit. Ireland escaped the worst of coronavirus but is still expecting to see its economy plunge into a deep recession, like the main winners from the EU fund. For example, the Ibec, a business group, noted that Irish GDP would fall by about 11 percent this year, which is more that for example in Spain and France.
Dutch euro-skeptics constantly reiterated that Holland had become an “ATM for Europe” after the outcome of the July summit. The Netherland’s Prime Minister, Mark Rutte is still in negotiations demanding additional decisions concerning € 390 billion plans for grants to be reviewed (or even completely scrapped) in favour of loans: he was heavily criticized at home for not protecting country’s interests.
As is known, the size of the non-repayable cash initially at €500 billion has been reduced to € 390 billion.
More than that: a Dutch MEP Derk Jan Eppink, from the anti-EU Forum for Democracy, called for a referendum on the new recovery pact; he said that the PM just gave up the fight…
However, among the losers there are also the EU leaders: among them is Charles Michel, the European Council President: it was his first major job with the task of preparing the so-called “negotiating boxes” meant for the member states leaders to negotiate a final agreement. His work ended in being accused of wasting time and skipping early chances of an early deal. The former Belgian prime minister was meant to build a consensus ahead of the summit, but his diplomacy efforts failed miserably. Commission President Ursula von der Leyen said lamented his “vague” proposals on the first day of talks, which led to almost 100 hours of bitter infighting. In her words: “If you look at the original summit draft, then you see it was vague and brought together different text blocks that don’t necessarily have a connection.”