EU President Charles Michel has convened an extraordinary summit on 20 February, bringing together the heads of state and government of the 27 EU countries to break the political deadlock over EU financing.
Michel says the time has come to reach an agreement at the highest level on the multiannual financial framework for the years 2021–2027. This corresponds to the term of the new European Commission, which took office last year.
For months, EU countries have been negotiating without significant results with the Von der Leyen Commission and the European Parliament over the new multiannual budget. Since the departure of the British, the budget faces an annual shortfall of around 12 billion euros. The other EU countries will have to share the burden of the lost UK contributions among themselves.
In addition, the European Union faces major shifts in spending, notably due to the Green Deal, the plan to be climate-neutral by 2050. Furthermore, the European Commission and the European Parliament have presented new demands and plans for the coming years that will require extra spending.
Ideally, the new multiannual budget would have been settled by the end of last year, by the previous European Commission under Juncker. It was already clear then that there were significant financial problems ahead, not only in terms of the amounts but also in timing. The European Commission needs about a year to draft laws to be able to spend the money. As a result, the first year of the new EU governing period risks becoming a lost year for launching new plans.
Four EU countries (the Netherlands, Austria, Sweden, and Denmark) want to keep the new seven-year budget at the current cap of a maximum of 1.00 percent (approximately 1000 billion euros) of the European gross national income. The Von der Leyen Commission aims for 1.11 percent, and the European Parliament advocates for 1.3 percent. But opinions differ not only on the money but also on the content of current and future EU countries. Some EU countries feel that the EU already has far too many tasks and should downsize.
In the past two weeks, close aides of EU President Michel spoke with the political advisors of the 27 heads of government. This procedure was intended to gauge where the bottom line lies for all parties. This discussion has been in a total political deadlock for over a year. According to Brussels sources, a compromise is only possible if the focus is not solely on the size of the budget, but also on how it is spent (who benefits) and on a new rebate system for countries (net contributors) that otherwise pay disproportionately to the EU.
By convening this extra financial summit, EU President Michel is putting pressure on the leaders to make concessions. Failure would not only be a defeat for him as EU President but would also negatively affect all EU leaders. Moreover, failure would only make reaching an agreement later this year more difficult. Above all, it will worsen the atmosphere, prevent the Von der Leyen Commission from starting innovatively, and halt other urgently needed reforms (Green Deal?) before they even get off the ground.