The European Union must deploy all financial resources for the medical, social, and economic recovery from the corona crisis. Not only out of solidarity with severely affected neighboring countries but also because we owe it to the next generation,â said the chairwoman of the European Commission, Ursula von der Leyen.
The European Commission presented plans for an adjusted multiannual budget, after earlier France and Germany together, and a group of âstingy fourâ had submitted conflicting plans. The proposal now presented by the European Commission includes several compromises on sensitive points, but also offers some ânew solutions.â Those recent novelties, however, constitute new hurdles over which the 27 EU countries are far from agreement.
The multiannual budget 2021â2027 proposed by Von der Leyen will cost 1.85 trillion euros (1850 billion) annually. Of that, 750 billion euros will be borrowed on financial markets for a corona recovery plan, of which 500 billion will be grants to countries and 250 billion loans to companies. This means the EU will manage the fund, to which applications and concrete plans must be submitted, and all finance ministers can monitor the expenditures.
On the revenue side, the European Commission tries to kill two birds with one stone. Many EU countries object to a âtransfer unionâ where strong and wealthy EU countries have to pay for the loans and deficits of weaker EU countries. There are also objections against raising the annual EU contribution.
The European Commission now proposes the introduction of European taxes, for example on plastic disposable bottles, internet profits, value-added tax for multinationals, and an environmental tax on dirty import products. Such ânew revenuesâ have long been an EU ambition but have so far always been blocked by ministers and heads of government. They have so far prevented the EU itself from collecting (tax) revenue; they want EU financing to continue going through (their control of) the 27 EU countries.
If EU countries keep resisting their own EU revenues, then after 2025 they will have to pay the final bill for the corona fund themselves and should not complain about an increase in their annual contributions, that is roughly the reasoning. The current proposal contains many compromises some opponents support and some supporters oppose.
The multiannual approach also includes elements of new policies, such as climate policy and the Green Deal. As a result, there is a lot of âshiftingâ within budgets (old subsidies are cut to fund something new).
For example, several tens of billions were added to the agriculture budget, among other things for more afforestation, more biodiversity, more rural development, and the new farm-to-fork food security. In return, about ten percent is cut from the well-known agricultural subsidies, partly shifted from large agricultural companies to small family farms.
Furthermore, the mandatory contribution of the 27 EU countries to Brussels will increase. But the annual rebate that net payers the Netherlands, Austria, Sweden, Denmark, and Germany receive on their contribution can remain for now. A sweetener for the grumblers, as was noted in the corridors. In the case of the Netherlands, the annual rebate amounts to approximately 1 billion euros.
EU President Charles Michel wants to âdo everything possibleâ to reach an agreement on the European recovery plan within a few months. He wants to discuss the matter at an extraordinary summit with the 27 heads of government in three weeks. Because of the coronavirus, it is still uncertain whether the heads of government will travel to Brussels for a real meeting. Personal contact is considered essential in sensitive negotiations, according to diplomats.
Dutch Prime Minister Mark Rutte expects it will take some time before a decision is made on the EU recovery fund. âWe will be having the discussion in Europe in the coming period; that will really take some time.â No decision is expected at the EU summit in June, Rutte anticipates. In that case, a decision can only be made in July under Germanyâs presidency.
Rutte did not want to comment substantively on the presented package yet. Almost all other EU capitals did express understanding, non-rejection, and approval. Rutte made clear he wants to hold on to the âprinciplesâ that the Netherlands set out on paper with Denmark, Sweden, and Austria.
However, it appears Austria already agrees with âpartly grants, partly loans.â Diplomats in Brussels expect Denmark and Sweden, both of which still have their own currency and are not in the euro currency union, do not want to unnecessarily hold an exceptional position again in the EU. In that case, the Netherlands risks becoming the only one still opposedâŠ