Rutte Also Frugal with Compliments on EU Budget and Fund Breakthrough

The European heads of government finally reached an agreement in Brussels on their ‘financial’ EU summit on the fifth day of negotiations on an unprecedented large economic stimulus package and a seven-year multiannual budget. This agreement is already being called ‘historic’.

The agreed corona recovery package of €750 billion and the seven-year EU budget of €1.074 trillion mark a milestone, as the EU countries have now, for the first time, decided to jointly borrow a large amount on the financial capital markets. Joint debt for individual countries had so far been unthinkable in the EU.

Under the leadership of Dutch liberal Prime Minister Mark Rutte, ‘four stingy’ EU countries (Austria, Sweden, Denmark, and the Netherlands) long resisted too many uncontrolled ‘grants’ from the corona fund.

Although the total size of the fund remains at €750 billion, the balance between subsidies and loans was ultimately restored. The final proposal now states €360 billion in loans and €390 billion in subsidies, which most still consider a decent outcome.

Although not all details of the agreement are yet known, it is already clear that the latest financial adjustments will have a major impact on key EU programs, some of which form the basis of the current priorities of the European Commission.

The only instrument intended to support the health sector was completely eliminated, and Horizon Europe, which was meant to stimulate innovation, was also significantly cut. Funding for the neighborhood policy and the Solvency Support Instrument, a €26 billion fund to support economically viable private companies, were both left out.

Commission President Ursula von der Leyen said it was “regrettable” that the solvency instrument was removed but still called the entire agreement “a big step towards recovery.” In addition, the four reluctant countries secured a larger discount on their annual contributions to the EU. By insisting on a smaller allocation of subsidies, the frugal countries undermined their own goal of modernizing the budget as a whole, critics now say.

A breakthrough is that the EU leaders agreed that the EU may impose ‘own’ taxes, thereby generating ‘own revenues.’ With this, the EU is no longer fully dependent on the goodwill of member states to fund EU operations through their annual contributions.

German Chancellor Angela Merkel – whose country holds the rotating EU presidency – said in an initial response: “Europe has shown that it is capable of taking new paths in such an extraordinary situation as this. We have laid the financial foundation for the EU for the coming seven years.”

French President Emmanuel Macron said, “This was a summit which I trust will have historic consequences.” He added that the Franco-German cooperation was crucial to closing the deal. Spanish Prime Minister Pedro Sánchez said that “one of the most brilliant pages in European history has been written” and praised the agreement as “an authentic Marshall Plan.”

But their Dutch colleague Mark Rutte refused to agree that it was a historic deal.