Fatal negotiations over billions: no deal, existential threat to EU

1. What is the EU Multiannual Financial Perspective and Recovery Fund and what does it offer for Lithuania?

The EU’s multi-annual financial perspective (MFF) is for the period 2021-2027. The EU budget, which, according to the latest proposal by EVS President Charles Michel, will reach 1,074 billion euros. (The previous MFF 2014-2020 amounted to € 1,082 billion).

Along with the 750 billion proposed. EUR from the Crown Crown Crisis Recovery Fund. The European Commission plans to borrow this money from the markets and from 2021 onwards. distributed to Member States over several years in the form of grants and loans (€ 500 billion in grants and € 250 billion in loans). We plan to pay the borrowed funds from the Recovery Fund within 30 years from 2028 of state contributions to the EU budget and certain taxes, the administration of which would belong to the European Commission.

Lithuania is promised about 11 billion. € 6 billion in support of the MFF (although € 7 billion remain “in the hands” after deducting contributions to the EU budget) and € 6.3 billion in the Recovery Fund (€ 3.9 billion in the form of grants and 2,400 million euros in the form of loans).

2. Why is Lithuania not very satisfied?

Lithuania has always advocated for a larger EU budget and continues to adhere to this principle, and the current MFP proposal is the smallest of all. The EU budget is long-term and its reduction could set a precedent for the EU’s next multiannual financial perspective, and the Recovery Fund is a multi-year temporary project.

Furthermore, Lithuania did not support the return of so-called overpayments to the EU budget, which, according to chap. Michel’s proposal will be available for Austria, Germany, the Netherlands, Denmark and Sweden.

Vilnius is also not satisfied with the decrease in funds for Lithuania through Cohesion Policy by almost a quarter compared to the previous MFF. According to Brussels calculations, Lithuania is significantly closer to the EU average and therefore cohesion funds, aimed at reducing the gap between the regions of the Member States, are decreasing. It is true that Lithuania can expect an additional 180 million. EUR, due to emigration, although this amount did not receive applause from G. Nausėda at least in February. The presidency maintains a similar position that the amount is small.

Another particularly important moment for Lithuania is the comparison of direct EU payments to farmers. Today, Lithuanians receive 176 euros per hectare, and the EU average payment is 266 euros, although the promise to close this gap has been promised for a long time and more than once.

Furthermore, Lithuania wants more funds for the closure of the Ignalina nuclear power plant. Now 490 million is earmarked for this. euros At the same time, Vilnius is not satisfied with the funds planned to guarantee the Kaliningrad transit: 139 million. euros Lithuania requested 692 million LTL for Ignalina. 215 million euros for the Kaliningrad transit. euros

“Lithuania’s negotiating position is logically banal. This has been the case in the negotiations on the financial perspective, as far as I can remember, since 2003. It is always the same: give us transit, Ignalina and more cohesion and equalize direct payments”, – Delfi, EU expert Dr. Klaudijus Maniokas.

3. What do the EU countries agree and disagree on?

The only thing the EU leaders agree on is that an agreement must be reached as soon as possible. Even before the coronavirus pandemic, it was feared that, in the absence of an agreement on the MFP, Europe would face stagnation, various infrastructure programs and projects such as Rail Baltica. Now, the situation is more serious: due to the coronary crisis, the EU economy is projected to grow by 2020. Total will fall 8.2 porc. GDP (eg Lithuania – 7.1%), so an immediate solution is needed.

“Obviously, the pressure is high now, because this time the decision will have to be ratified by national parliaments. This has not been the case in the EU for a long time, and it forces many EU governments to take positions without compromise. Even if an agreement can be reached, national parliaments will only have half a year to ratify a possible agreement, which is record time, since ratification in parliaments generally takes between one and a half to a few years. The pressure is big and the threats are many, “said K. Maniokas

So the list of disagreements is long. As a senior EU diplomat informally told accredited journalists in Brussels, the approach differs due to the size of the MFP and the Recovery Fund, the latter’s relationship between loans and grants, its governance, the EU tax administration , agricultural and cohesion funds, reimbursement of overpayments and the rule of law.

The greatest conflict over the size of the MFP and the Recovery Fund. In February, the EVS did not reach an agreement on the EU budget because the so-called “austerity four” (Austria, the Netherlands, Denmark and Sweden) did not agree with the size of the MFP at the time because it seemed too large for them. The size of the recovery fund is 750 billion. now it also annoys “savings”, which are among the largest donors to the EU budget. Nor is it appropriate for them that a large part of the money in this fund (€ 500 billion) is allocated as grants rather than loans, which would further discipline the recipients of the money.

Many countries are also concerned about the distribution of the Recovery Fund money, and the majority goes to the southern states, which are richer than the eastern EU countries. And with Poland, the phenomenon as a whole: according to the latest forecasts by the European Commission, Poland will suffer less from the crown crisis (the economy will fall 4.6%), but it is expected to receive one of the largest amounts from the Fund Recovery (€ 63.8 billion).

Another serious battle awaits the application of the rule of law, which states that EU financial assistance can be suspended if a member state does not respect the rule of law. This is directly directed against Poland and Hungary, whose governments are in conflict with Brussels over certain supposedly undemocratic reforms. For example, the Hungarian Parliament has adopted a statement calling on Prime Minister Viktor Orban to block the MFP and the Recovery Fund pending the investigation into the violation of the rule of law against Hungary and Poland.

“The rule of law has long been proposed by the Commission. For a couple of years now it has been debating. It is obvious that here is the issue of Poland and Hungary, but at the same time it is a sensitive issue for Lithuania” , said the EU expert, taking into account the dilemma for Lithuania: supporting a strategic partner Warsaw or Brussels According to Lithuanian diplomats, the current Ch. The rule of law proposed by Michel for Lithuania is just as appropriate.

4. How will the European Council meet and in whose hands is the key to an agreement?

Unlike usual, EU leaders will meet in Brussels on Friday morning. EVS starts at 10 p.m. tomorrow (Brussels time). There are more differences: the biggest one, the EVS building will not be crowded with crowds of journalists and will not rub shoulders with each other to ask EU leaders a question at the entrance. Due to the high risk of coronavirus, EVS will monitor the media remotely. The size of the national delegations is also limited. If there were 19 delegations in the past, there are now only 6. Therefore, EU leaders have ensured some privacy and reduced the possibility of information leakage. At the same time, they will have to maintain a social distance, wear masks, and handshakes and kisses are prohibited.

A joint interview with David Sassoli, President of the European Parliament, will begin, followed by a session and bilateral and multilateral meetings until the morning. The EVS will continue on Saturday and there is even talk that it could go to Sunday until an agreement is reached.

German Chancellor Angela Merkel, who holds the EU presidency this semester, will undoubtedly play a key role. In particular, his influence and alliance with the other EU heavyweight, French President Emmanuel Macron, are very hopeful. This is a great opportunity to enter the history of Merkel, who plans to leave the political scene quickly. Previously, he met with the leaders of the “austerity quartet” and other countries.

“You can see from the signs that the” frugal four “tend to look more positive. And, apparently, the broad lines of engagement are now being drawn,” said K. Maniokas.

It is true that Lithuania agreed that President G. Nausėda would have the opportunity to express our country’s position on the distortion of the history of Russia. It is doubtful that many of the EVS participants are interested in this, as billions of EU countries will be on everyone’s mind. On the other hand, it can provide a brief respite from disputes over the same billions in the EU.

5. Will an agreement be reached and what does Lithuania mean?

“We are not sure whether we will find a consensus, but I am not saying that this is not possible,” said the EU’s senior diplomat, who said that no further EVS meeting had been planned yet.

The same was repeated on the eve of the meeting, on Thursday, an EU official said: “Not yet. There is no guarantee of an agreement, on the contrary, there are still many differences, it is necessary to build bridges “.

Lithuanian diplomats also said that at least on Thursday the deal was a long way off.

“Germany would like to and will do everything possible to reach a decision.” It would give a 60:40 chance of an agreement being reached. If everything is postponed again, then it is clear that there will be no MFP or Recovery Fund from next year. And this is an existential threat to the EU, “predicted K. Maniokas.

The most difficult task is how to ensure that all EU leaders return home to demonstrate that they have fought like lions for the interests of their country and that they have won.

Whether G. Nausėda can expect all the Lithuanian requirements to be implemented is highly doubtful. It is difficult to expect the MFP to increase and the “economic quartet” to be deprived of the opportunity to recover overpayments. It is also naive to talk about increasing Cohesion money for Lithuania.

However, you can also expect some gifts. Some diplomats believe that cap. Michel has 2.5 billion left in his secret pocket. part of which could be used to harmonize payments to farmers. For example, 2013 then President Dalia Grybauskaitė earned 100 million. “Donation” in euros to the Rural Development Program.

“It just came to our attention then. We have already been offered that 180 million. Compensation for the lost population is a brilliant discovery from Lithuania. I do not think we will get more or add another ten million to any Kaliningrad or Ignalina transit,” said the EU expert. – But anyway, I think there is no reason for us to tear ourselves, because this proposal is very suitable for us. Perhaps it is better for the southern EU countries, but we do not envy another good. In fact , more care must be taken to make good use of that money. “

Namely, will Lithuania be able to absorb the 6.3 billion LTL provided in three years? euros from the Recovery Fund? Lithuania is not as slow in this area as, for example, Italy, but compared to previous EU money absorption rates it is worth worrying about

“The Government is now making additional efforts to create an additional mechanism through the Strategic Project Management Instrument. I think there will be such an effort, but there is such a simple rule in the implementation of promises: the criteria of the so-called reference class. T.y. “If someone wants to build a bridge in a year, they can verify their promise by looking at how long it took to build similar bridges in the past,” Maniokas told Delfi. – Therefore, looking at how much Lithuania has been able to spend per year according to the benchmark class criterion, we find that capacity has not increased in recent years, but has decreased significantly. In the past four years, Lithuania has spent more than 400 million. up to 900 million Euro from the EU per year. Now he is said to be whistling to spend $ 6 billion. euros for several years. Then it won’t be. Now is the end of a project cycle, so maybe things will move faster, but this mission is simply impossible. (…) Other forms are needed. There are, but you need someone to listen and think seriously. But the elections are approaching and everyone shouts “will!” And they hope to put on their hats. “