Error 404: Budget not found. The latest on the EU budget and recovery fund

Money - © Markus Spiske on Unsplash Markus Spiske

“White smoke”. “We have a deal”. “A deal for Europe”. These were the recurring phrases in my Twitter news feed on 10 November. Just a couple of hours of not checking my Twitter and I thought I had missed out a historic event. Brussels-based politicians, political groups and institutions were popping the champagne after the deal between the European Parliament and the Council on the next EU long-term budget. But what does this mean exactly? Do we have a new budget for the period 2021-2027? Is the money of the recovery fund ready to be distributed? The answer is no. Indeed, despite this agreement, nothing is set, yet. Moreover, just six says after the deal, that enthusiasm disappeared. Why? Here is a succinct overview of the latest developments and why one should never claim victory too early!

We have a deal - or maybe not

To be sure, a deal did occur on 10 November. After months of talks between the European Parliament and the Council following July’s agreement of EU leaders, negotiators from the two European institutions reached an agreement on the budget for the upcoming seven years. The next EU long-term budget, which is supposed to come into effect as of January 2021, has been negotiated for years now. To be precise, 2 years, 6 months and 9 days passed since the Commission’s first proposal before this step was reached, which, however, does not constitute the final agreement.

Some optimism is understandable…

Although the budget saga is anything but over, it is justifiable that EU’s lawmakers wanted to celebrate the deal. Particularly, two elements of this agreement improved the European Council’s conclusions adopted at the special European summit last July. Firstly, negotiators from the European Parliament managed to secure an increase of funds in the field of research and health, thus reinforcing some of the EU’s flagship programmes like Horizon Europe, EU4Health and Erasmus+. The top-up will amount to €15 billion, according to the decision of the German Council Presidency and the European Parliament. Good news is also that despite the increment, the maximum spending targets previously agreed on by EU leaders, will be respected. In other words, this should not trigger big discussions in the following negotiation phases. Secondly, the deal confirmed that 30% of the package including both the EU’s budget and the Next Generation EU recovery fund will be dedicated to combatting climate change, with a special focus on biodiversity.

…but excessive optimism is not

However, all that glitters is not gold, and the final word has not been spoken. As mentioned above, no formal decision has been taken with this deal. The European Parliament needs to vote, and the Council has to sign off. In addition, the Council will have to unanimously agree on the Own Resources Decision, namely the measures the EU will introduce to complement Member States’ contributions to the budget, such as environmental taxes. Afterwards, the 27 national parliaments will have to ratify that. Finally, some aspects of the recovery plan have not been finalised yet. Thus, several steps and actors are still at play.

Lastly, one crucial aspect became a political hot potato over the past days: rule of law. Already some weeks ago, the Hungarian Prime Minister Orbán expressed his dissatisfaction with the rule-of-law mechanism, which would link the disbursement of EU funds to the respect of this fundamental principle, and he found in his Polish counterpart Morawiecki an ally. Despite the issues that these two countries are having with the respect of the rule of law, many were thinking that this threat would have never materialized. Just six days after the deal between the European Parliament and the Council, however, the party atmosphere in Brussels vanished. The threat became reality on November 16th, when Hungary and Poland blocked the negotiations of the whole financial package during a meeting of EU ambassadors. In the following days, some reconciliation efforts were made by the German Chancellor Merkel, but in vain. The upcoming weeks will be crucial to see whether European politicians will compromise on one of the fundamental principles of the EU.

To sum up, the final agreement on the EU’s next long-term budget and the recovery fund is approaching, but white smoke has not come out from Brussels’ chimneys yet. While only a few steps are missing, last-minute plot twists are still possible, and Poland’s and Hungary’s veto is proof of that. Nonetheless, an agreement must be reached soon to have a swift implementation of both the seven-year budget and the coronavirus recovery plan. In fact, we may be used to see the European project as a path with ebbs and flows, yet what is at stake now is not only the future of the European project per se, but also the lives of millions of citizens who have been suffering the tremendous consequences of the pandemic. While hoping for a quick solution, we can certainly draw one main conclusion from this story: Never celebrate too early – it may bring bad luck!

Alessia Setti


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