Negotiations on long-term EU budget continue

During the second day of the summit governance and conditionality were again among the hot topics

The EU summit on the bloc's common budget for 2021-2027 and the one-off recovery fund that will help the countries most affected by the pandemic to overcome its devastating effect and get the economies back on their feet, failed to strike a deal on Saturday, when indeed it was scheduled to end. After two long days of talks, leaders of EU27 decided to continue on Sunday to try to find an agreement.

The debates during the second day of the summit were focused again mainly on the size of the recovery fund, governance and conditionality, how many grants and how many loans, what criteria to allocate them to use, and also the volume of the MFF and rebates.

European Council President Charles Michel had prepared for Saturday morning a new negotiating box, in an attempt to accommodate positions after holding a series of consultations - bilateral or in a group of several prime ministers, hearing various positions, views and interests. According to some sources, there was a version the amount of grants - €500bn in the original proposal, to be reduced by €50bn, but this was seen by the so-called ‘frugal four’- the Netherlands, Sweden, Denmark and Austria, “a very small decrease” and insisted on a more substantial cut. There have also been small shifts in the MFF.

After Saturday's meeting, which ended at 11pm, Austrian Chancellor Sebastian Kurz tweeted: “Back in the hotel after a long day of negotiations on the MFF and Recovery Instrument. There has been movement in the right direction, but there is still a long way to go tomorrow”. Earlier, he also told reporters that the four countries clearly reject the current proposal for the Recovery Fund, which provides for €500bn in grants.

We need to ensure the instrument will support the green and digital transitions, structural reforms and benefit those who have been hardest hit by the Covid-19 crisis, Kurz explained noting that they will not agree to any measures leading to a permanent ‘transfer union’. He also said that country managed to negotiate higher rebates, but would continue to fight for more. On many occasions, Finland also supported the position of the four countries.

Also after Saturday's meeting, Italian Prime Minister Giuseppe Conte said Europe is blackmailed from frugal countries over the recovery fund and seven-year EU budget.

"We have to find a synthesis, it is in everyone's interest. The tools must be proportionate to the crisis and effective. Our answer must be prompt, solid, robust", he said. Conte also stated he would continue to fight for a recovery package that commensurate with the scale of the crisis.

Charles Michel and Viktor Orbán, the Hungarian Prime Minister, met as part of Saturday's agenda for the second time during the summit. The Hungarian Prime Minister warned before the summit that said he will fight against linking the fund and the seven-year budget to the rule of law. He threatened before the summit that if the conditionality remain, he would veto the entire package.

Polish Prime Minister Mateusz Morawiecki also strongly opposes this approach, as well as the requirement that only countries committed to achieving climate neutrality by the middle of the century would be eligible to receive funds from the Just Transition Fund to replace coal-fired power plants with modern energy facilities.

The meeting on Sunday starts at noon, and if there is no a positive outcome this time as well, EUCO President Michel will probably convene a new summit on the budget and the fund again next week.

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