EU Parliament, Council Agree On Budget, Recovery Funds

The European Union Parliament and representatives of the 27 EU governments reached agreement Tuesday on the bloc's long-term budget containing €750 billion ($886 billion) in unprecedented recovery funding designed to mitigate the devastating economic impact of the coronavirus pandemic.

Sebastian Fischer, a member of the negotiating delegation for the Council of the EU, announced on social media that the council and the Parliament had reached a political agreement on the budget, which will include targeted reinforcement of EU spending programs. The council is made up of ambassadors from the 27 EU governments, while the Parliament consists of individuals from those jurisdictions elected specifically to serve in the EU body.

Michael Clauss, the German ambassador to the EU, said in a statement that negotiations with the European Parliament "took time, but we have finally made it — we have reached a political agreement on the last details of the EU's next long-term budget." Clauss led the negotiations on behalf of the council because Germany holds the six-month rotating presidency of the body.

Besides including a targeted reinforcement of EU programs, among them health and education programs of €15 billion, the budget respects the expenditure ceilings set out by European leaders at a summit in July. It also offers more "flexibility to allow the EU to respond to unforeseen needs" as well as greater involvement of the budgetary authority in the oversight of revenue under the recovery package.

There had been some doubt about whether new budget would be approved in time to be in place for the new year, with Oct. 13 representing the deadline. Tuesday's breakthrough means that the budget can be approved by the national legislatures of the EU's 27 members in time to be in place Jan. 1.

The EU is "now in a position to take the next crucial steps in the process," Clauss said — that is, submitting the different parts of the package to the member countries and the Parliament for endorsement.

Last week the European Parliament and representatives of EU countries reached agreement on a contentious aspect of the bloc's budget linking countries' receipt of pandemic relief funds to respect for the rule of law.

The conditionality allows the bloc to protect its budget when it is established that breaches of the principles of the rule of law in a member country seriously risk affecting the sound financial management of the EU budget or the protection of the financial interests of the EU.

With the levels of funding and the so-called rule-of-law conditionality issue resolved, just one issue remains: new funding mechanisms to pay for the unprecedented borrowing the EU will have to undertake to amass the €750 billion relief fund.

The issue of which new revenue streams will be approved as part of the budget is expected to be strongly contested. Tax measures need the unanimous approval of the heads of government from every EU country, and national governments rarely cede taxing power.

Candidates for the new revenue streams include a plastics tax, levies on aviation fuel and maritime fuel, a carbon border tax and a new tax on digital services.

"I hope that everyone understands the urgency of the situation and will now help to clear the way for the swift implementation of the [budget] and recovery package," Clauss said. "No one needs new hurdles and further delays."

Representatives of the Parliament did not respond to a request for comment.

--Editing by Joyce Laskowski. 

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