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After the German EU presidency reached a compromise on the rule of law mechanism in bloody sweat, the danger of a Hungarian and Polish veto was over, thus removing the obstacle for the EU-27 to adopt the next budget of seven years (MFP) and the corona virus. Epidemic Reconstruction Plan (Next Generation EU – NGEU).
In our November article, we discussed in detail that it would clearly be worth it for Hungary in the economic field if Viktor Orbán does not veto it. We can benefit from two pockets of the NGEU Backbone Recovery Fund (RRF)
- on the one hand, non-reimbursable aid (EUR 390 billion in total at 2018 prices),
- In addition, we can borrow from NGEU at a low interest rate (360,000 million euros in total in 2018) that is not available in the international market.
Hungary is entitled to a maximum of € 8.24 billion of the grant over the next seven years and € 8.91 billion of the loan.
Together with Zsolt Darvas, professor at Corvinus and analyst at the Bruegel Institute, we had previously reviewed the Hungarian “share” of the EU budget for 2021-2027 and the recovery fund, and now we have turned to him. Who was more important for Hungarians and Poles to veto? What is the next step after the budget is approved? What would have happened if there was no agreement? Until when will the funds from the 2014-2020 budget arrive? We turned these problems around.
Outcast southerners
The budget for the next seven years is about 1,074,000 million euros for the union, to which will be added a recovery fund of almost 750,000 million euros. The Member States have already said yes to this budget of over € 1.8 billion. The floating vetoes of Hungary and Poland caused serious alarm among the Member States worst affected by the Covid-19 epidemic: Greece, Italy and Spain were so hard hit by their economies and labor markets that they would need NGEU in weeks and months without exaggeration. of the amount owed. Let’s see how and when they access!
Now that the European Council (CoE) has adopted its common position on the budget, the budget will be presented to the European Parliament, which must approve it. (The EP can ask for amendments, this has to go through commissions and then the budget goes back to the ET and another round of adoption arrives). Although many MEPs are not satisfied with the compromise reached on the rule of law, above the recovery fund. For economies in ruins, the adoption of NGEU resources is paramount now, as this is where they can begin to rebuild.
This is why Member States are already working intensively on plans for the EU to provide them with resources for various purposes. In the background, these programs have been constantly discussed with the European Commission, which is especially interesting in our case. After all, while Viktor Orbán constantly and confidently threatened the veto and emphasized that the country could fend for itself, without an EU recovery fund, for years,
Meanwhile, the Finance Ministry staff certainly had to work hard so that if the Prime Minister gave up the veto, we could submit our detailed project proposals as soon as possible to obtain the desired resources from the NGEU.
The proposals of the Member States are subject to an opinion of the European Commission and approved by vote of the Council of Finance Ministers of the Council of the European Union. Once this is done, the implementation can begin, it will not be up to the EU bodies to start withdrawing the money as soon as possible. It is up to the EU members to try to put together project packages. According to Zsolt Darvas’ forecast, everyone is expected to submit their proposals in April, but Spain, for example, has already published its detailed plans, so if the EU budget and the NGEU are finally approved and the legislation goes into force, they can now formally apply for a grant. and credit.
A decision must be made within three months.
At the EU summit in July, it was agreed that the European Commission should evaluate each national plan within two months. On this basis, the European Council must take a decision within four weeks. In other words, if Hungary decides to start using its ceiling for 2021, the decision must be made within three months. (If many Member States submit applications at the same time, a three-month evaluation seems more likely; if only a few do, the decision time may be shortened). Therefore, it appears that Member States that have started to develop plans for their rescue package in advance can gain support.
It was also decided at the July summit that in 2021 there will be a 10% pre-financing of the largest RRF fund. There is no exact deadline yet on how long to wait after the adoption, but it probably won’t take another time for a month or two.
Thus, in total, the first payment is expected 4-5 months after the presentation of the plans, which in the case of Hungary is expected to be around 675 million euros of RRF grants.
Payments from the other components of the NGEU are also expected from 2021, but will arrive somewhat more slowly. And if the Hungarian government also makes maximum use of the prime rate line of credit from the rebuild package, we can also get a prime rate loan of € 891 million relatively quickly.
If the budget had not been approved, member states would not have had to immediately throw in the towel, as the funds for the 2014-2020 budget will be disbursed by the union until 2023. To date, member states have requested only 47 percent of available structural funds, and Hungary stands at 50 percent, and will receive the remaining 50 percent in the next three years.
Zsolt Darvas highlighted in this regard:
if the veto had been maintained, the EU money would still have reached Hungary, only much more slowly and in a smaller amount.
At the end of the day, on the one hand, we would not have received anything from the recovery fund, and on the other hand, if there is no agreed budget for 2021-2027, the twelfth system will come into effect. Consequently, starting in January 2021, only 1/12 of the previous year’s budget can be used each month. However, the full payment of the twelfth is not automatic either, as some new programs may not be able to start.
The European Commission estimates that the EU budget would have been reduced by about a quarter in this case.
(Cover: Johannes Hahn, Member of the European Commission responsible for Budget and Administration, addresses the Plenary of the European Parliament MTI / EPA / REUTERS / Yves Herman)
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