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The European Union’s relaunch plan to overcome the Covid-19 crisis is currently on hold, given the veto of Hungary and Poland due to the conditionality to access community funds in compliance with the rule of law.
In July, after a marathon of negotiations that lasted for four nights and five days, the Heads of State and Government of the 27 finally reached a compromise on the EU’s multi-annual budget for 2021-2027, amounting to € 1.07 billion. of euros. euros, and a Recovery Fund of 750 billion euros.
After some ten weeks of intense negotiations with the European Parliament, which was unhappy with the low ambition of the multiannual financial framework for the next seven years, the Council reached an agreement in principle with the Assembly in early November, agreeing to increase financial allocations of the budget of around 16 billion euros and already after the parties have agreed on the general conditionality regime for the respect of the rule of law.
So the process finally seemed to be on the right track to move to the ratification stage, so Community funds can start to flow in early 2021, more this week Budapest and Warsaw kept their “promise” to veto a package that requires respect for the rule of law, leaving Europe in a new impasse, less than a month and a half before the end of the year.
On July 21, on the fifth day of what went down in history as the EU’s second longest summit (they were just hours away from breaking the Nice summit record), European leaders finally reached a compromise on around a budget. for the next seven years for an amount of 1,070 million euros and a Recovery Fund of 750,000 million (390,000 million euros in grants and the remaining 360,000 million in loans).
The long marathon of negotiations was largely due to the concerted position of four self-described “frugal” Member States – the Netherlands, Austria, Sweden and Denmark – who opposed a more ambitious long-term budget and also advocated the imposition of various conditions of access to funds, including the issue of respect for the rule of law.
On the occasion of the July agreement, the European Parliament was clear in welcoming the commitment to the Recovery Fund, the so-called ‘NextGenerationEU’, but warned from the beginning that it did not accept a multi-annual budget with so many cuts in programs that it considers “key”. anticipating complicated negotiations between institutions.
And indeed, it took the institutions around ten weeks to reach a compromise, following intense negotiations between the German presidency of the EU Council – representing the Member States – and the Parliament, which has two Portuguese negotiators. , MEPs Margarida Marques (PS) and José Manuel Fernandes (PSD).
On November 5, the parties reached an agreement, which they described as “historic”, on establishing a link between the use of EU funds and respect for the rule of law, and five days later they reached an understanding on the global budget amount for the next seven years, with Parliament securing an additional € 16 billion for programs such as Horizon Europe (innovation), Erasmus + (education) and EU4Health (health), raising the global budget envelope to more than 1.08 one billion euros.
Last Monday, the threat of veto of Hungary and Poland, which had been “agitated” for some time by Prime Ministers Viktor Orbán and Mateusz Morawiecki, materialized during a meeting of the permanent representations of the Member States to the European Union, in which the 27 were supposed to ‘seal’ the compromise reached by the German presidency.
This time without the usual alliance of the rest of the members of the so-called Visegrad Group – Slovakia and the Czech Republic are not associated with Hungary and Poland on this matter -, Hungarians and Poles, without the force to veto the mechanism on the rule of law, already that this element the package only needed a qualified majority to be approved, then they vetoed another matter on which they have no reservations, that of own resources, because it needed unanimity, thus blocking the entire process.
This issue is crucial for the approval of the entire package, since it is essential that the 27th unanimous endorsement is required so that the European Commission can go to the financial markets, on behalf of the EU, to issue debt to collect the 750,000 million Euros from the Recovery Fund.
Reactions to the blockade were not delayed, given the urgency recognized by all, or almost all, of putting into operation the “bazookas” to attack the crisis as soon as possible.
In addition to the German Presidency of the Council and the European Commission deploring the veto of Hungary and Poland, the Hungarian Prime Minister’s own political family, the European People’s Party (EPP), the largest European party, also criticized the “irresponsibility” of this blockade, with parliamentary leader Manfred Weber recalling that “whoever respects the rule of law has nothing to fear.”
Many believe that Orbán and Morawiecki will eventually give in, especially since their countries are being much more affected by the pandemic in this second wave and the Recovery Fund reserves many billions of euros to deal with the situation. However, these two countries, which have long been the target of Brussels for alleged violations of the rule of law, can technically maintain the veto as the absence of an agreement would mean that the EU would operate in 2021 with an emergency budget and funds would continue to flow. although in a much smaller dimension.
The truth is that Hungary and Poland seem firm in their positions and a solution that appeals to all parties seems very difficult to achieve, not least because the European Parliament has already accepted the formula negotiated with the German Presidency of the Council at a high cost. and very hard. Accept that conditionality is even more vague.
In this way, and in parallel to the numerous ongoing diplomatic contacts with Budapest and Warsaw, until they see results, the subject will undoubtedly dominate the new videoconference of heads of state and government scheduled for Thursday, which was dedicated to the coordinated response to the covid-19 pandemic.
Although this is another virtual European Council, making it very difficult for fringe contacts that are often decisive in unlocking deadlocks, the leaders will certainly seize the opportunity to try to convince the Prime Ministers of Hungary and Poland to unblock the entire Crisis response package, at a time when the second wave of the pandemic hit Europe violently, plunged into the worst economic crisis since World War II.
Portugal is following this process with particular attention, not only because it wants to have anti-crisis funds available as quickly as possible: it has € 15.3 billion in grants, in addition to the roughly € 30 billion in the budget. for the next seven years, but also because on January 1 he succeeds Germany in the rotating presidency of the Council.
As the Minister of Foreign Affairs, Augusto Santos Silva, recently assumed, an “absolutely essential task” of the presidency is to initiate the long and complex task of implementing the Recovery Fund and, from the beginning, the responsibility of reaching the qualified majority of 27 necessary to approve the national plans of the Member States for the release of the first tranche of loans and grants from the European Recovery and Resilience Mechanism.
If the current blockade continues, the future Portuguese presidency runs the risk of starting functions without a formally adopted budget or fund, in a context of economic and social crisis unprecedented in the history of the European project.
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