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Yesterday afternoon the European Parliament and the Council of the European Union, a body that includes the representatives of the 27 governments of the EU, announced that they had reached a compromise on the Union’s multi-annual budget for the period 2021-2027. It is an important step towards the approval of some measures that have been debated for months – above all, the so-called Recovery Fund and the new mechanism for respecting the rule of law – and the European institutions have greatly welcomed the agreement reached.
In reality, it will still take some time, and further negotiations between Member States, to understand to what extent and when the compromise will enter into force.
The budget of the European Union is financed proportionally by the member states and is the reservoir that is used to operate the community institutions and finance the so-called European funds. Its main items are decided every seven years, even if there are small adjustments each year, and in 2021 the one that will remain in force for the next six years will come into effect.
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A first question refers to the scope of the compromise reached. Excluding the Recovery Fund, the new budget will contribute approximately 1,074 billion: a figure very similar to that of the previous budget, equivalent to approximately one per center of the GDP of the European Union. It was the price that the most progressive leaders and countries inclined to increase the European budget have had to pay for the less convinced to accept the Recovery Fund. Even individual spending will not undergo radical changes, and the compromise reached by Parliament yesterday has left the agreement more or less unchanged.
At the beginning of the negotiations, Parliament had asked individual states to increase the availability of the budget by a very significant amount, including, by various estimates, between 40 and 110 billion. The final commitment foresees 16 billion more than the project proposed by the Council, which mostly tweaks expensive budget items for Parliament such as health and research (the Erasmus + program, for example, will have 23.4 billion available instead of 21, 2 proposed by the Board).
#MFF: This is how the additional 16,000 million euros are distributed, boosting # EU4Health, #ErasmusPlus #HorizonEurope and other key programs in the #EUbudget https://t.co/fx312CJ1WN pic.twitter.com/wGhYLnIEJq
– BUDG Committee Press (@EP_Budgets) November 10, 2020
But above all, the money agreed by Parliament will not be immediately available: it will in fact be deducted from the fines imposed by the Union Competition Department in the coming years, assuming that they exceed that amount and that they are effectively collected. These are two legitimate questions: in the last five years, the Commission has imposed around 8.2 billion euros in fines for unfair competition, but only part has been paid, as companies can appeal in European courts and reduce or reduce even cancel the fines.
It is also necessary to understand whether the agreement will be able to complete its legislative process and will be approved by Parliament – it should be a formality – and by the Council, where it could encounter some obstacles. Hungarian Prime Minister Viktor Orbán, head of a semi-authoritarian government, is staunchly opposed to the new rule of law mechanism, which will almost certainly, if applied, target countries like Hungary and Poland, and has threatened to veto the entire multi-year budget if the mechanism is not modified.
– Read also: Europe wants to put Hungary and Poland in line
European officials are confident that theirs is a hoax: the Hungarian economy stands out above all thanks to European funds – from the latest budget it has raised almost 30 billion euros: a huge amount in a country that has an annual GDP of 160 billion – and Orbán can hardly afford delays in its delivery. If no agreement is reached on the new budget before the end of the year, in fact, the European Union would enter provisional exercise and would have great difficulties in allocating and disbursing funds. David Carretta, Radio Radicale correspondent for the European institutions, writes that governments will begin to discuss the compromise reached yesterday at today’s meeting of Coreper, the body that brings together all the permanent ambassadors to the EU from the 27 governments.
Finally, there are still some issues to be resolved in the Recovery Fund, which has not yet been negotiated in detail. Yesterday, in a decision separate from the budget negotiations, Parliament’s Committee on Budgets approved the negotiating basis for the negotiations with the Council, which will take place in the coming weeks: among other things, Parliament asks to increase the advance of funds totals to national governments, going from 10 to 20 percent, which will be paid in the first part of 2021 to immediately start the selected projects.
Once an agreement has been reached on both the multi-year budget and the Recovery Fund, before starting to disburse the funds, the latter must also be approved by all national parliaments, since it will be necessary to explicitly approve the procedure by the which the European Union will produce values. Capture the 750 billion of the Fund in the financial markets: this could be a problem, especially in the most conservative countries from the economic point of view.
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