BRUSSELS – With much discord still among European Union leaders, a video summit this week seems to have no hope of finding a compromise on a multibillion-euro post-coronavirus recovery plan or on the long-term EU budget.
Several EU officials and government leaders have shot down expectations ahead of Friday's meeting, warning that the remote discussions will mainly serve as a springboard for a future accord to be sealed, possibly in July, when leaders will be able to convene for in-person negotiations.
Friday will be the first time leaders will discuss the 750 billion-euro ($825 billion) coronavirus recovery fund proposed in May by the EU's executive arm to help countries weather the downturn triggered by the deadly virus. The aid plan, a blend of debt mutualization, grants and loans, is linked to another thorny issue which is far from being agreed — the EU's seven-year budget.
“You need this moment when you have collective discussions. Leaders need to feel what the others feel. That’s already a first step," a senior EU official said on Thursday. “We enter a phase of negotiations. We hope there is a momentum and that it will be appropriate for Europe to have an agreement before the summer break." The EU closes for business in August.
Backed by Germany and France, the recovery fund should be incorporated in the 2021-2027 EU budget under the commission's plans. Two-thirds of the fund — a half-trillion euros — would take the form of grants, while the rest would be made up of conditions-based loans for which countries could apply.
A group of four countries, however, the so-called “Frugal Four" consisting of the Netherlands, Denmark, Austria and Sweden, argue that grants should not be just handed over and that rescue funds should be paid back.
In a letter published by the Financial Times this week, the four countries' leaders pleaded for a “realistic level of spending," asking “how could it suddenly be responsible to spend 500 billion euros of borrowed money and send the bill into the future?"
Under the commission's project, applicant countries would have to outline their aims for the money and what reforms they intend to undertake to ensure their economies are more resilient in the future. The applications would have to be endorsed by the EU partners.
To fund the plan, the Commission proposed borrowing money on financial markets. The European Commission has a triple A credit rating, which would give it favorable loan terms. Repayments would not begin before 2028, with the full amount due after 30 years.
Asked about the Frugal Four's opposition, the senior EU official said dealing with the opposition of a group of countries makes negotiations more difficult since the Council decides by unanimity.
In his invitation letter to member states' leaders, summit host and EU Council president Charles Michel said Friday's discussions should help clarify the size and duration of the recovery plan. He asked for a constructive debate on the loans and grants issue.
Michel also pointed out several points where a consensus is emerging, including the need for the money to target the sectors and EU regions the most affected by the crisis.
As for the overall long-term budget, its size, financing and programs have yet to be agreed. The EU money is used for a variety of purposes, from transport and energy policy to space programs, migration and border management, security and farm subsidies. The last time they discussed the matter, EU leaders could not find a compromise after 28 hours of talks,
Taking into account the coronavirus crisis, European Commission president Ursula von der Leyen has since proposed a revised long-term budget of 1.1 trillion euros for 2021-2027 that would represent around 1.1% of European GDP after the U.K.’s departure, coupled with the temporary reinforcement of the 750 billion euros set aside to combat the virus. In total, it would amount to 1.85 trillion euros.
“Our ultimate goal is to reach a deal as soon as possible," Michel wrote. “There is still quite some way to go towards an agreement, so we will need to work hard in the coming days and weeks. We will succeed if we enter talks with a sense of responsibility and the willingness to come out of this major challenge united and strong."