Record EU budget for 2021 proposed by EC

Main objective is Europe's economic recovery, education and culture become lower priority

On Wednesday, the European Commission has submitted a proposal for a record budget for EU expenditure in 2021, aimed at addressing the immediate economic and social damage brought by the coronavirus pandemic and kickstarting a sustainable economic recovery.

The draft budget provides €166.7bn in resources, supplemented by another €388bn in grants and approximately €133bn in loans for modernisation of Member States' economies over the next three years, as part of the Next Generation EU recovery instrument. Bulgaria expects to receive up to €12.3bn from the instrument's resources.

In comparison, EUROPOST reminds that the EU budget for 2020 amounts to €172.5bn. “In these extraordinary times, the EC's proposal mobilises unprecedented support,” Budget Commissioner Johannes Hahn said in a written statement following the presentation. “The annual budget 2021 will help hundreds of thousands of people, companies and regions to overcome the crisis and emerge stronger than before,” he added.

The proposal, however, is too ambitious in terms of allocation of recovery funds. The Commission intends a larger portion of the resources to go to the Recovery and Resilience Facility - approximately €133bn in grants and €131.5bn in loans. In May the EC proposed this instrument in order to support the Member States in combating the health, economic and social crisis resulting from the outbreak of the Covid-19 pandemic, in exchange of reforms, including fiscal adjustments - a conditionality that has caused controversy in many Members States.

The budget proposal envisages also €8.28bn for the Solvency Support Instrument, which aims to support viable companies whose business has been hard hit by the economic downturn due to the coronavirus pandemic.

The Common Agricultural Policy (€55.2bn) and Cohesion Policy (€47.15bn) will continue to be also among the main recipients of budget funds, as the regional development under REACT-EU will be further supported by the recovery instrument with another €42.45bn in 2021.

The remaining recovery funds will go for science research and innovation under InvestEU, Just Transition Fund - aimed at tackling the inequalities caused by the green transformation, EU4Health - the new health programme which was proposed by the EC to help equip Europe against future potential health threats and to support third countries affected by the pandemic. Resources for education, migration, as well as for pre-accession assistance, would be earmarked at minimum levels.

Wednesday's proposal is the first budget in the 2021-2027 programming period, as well as the first one not to provide for contributions and payments from the UK, since London left the EU on 29 February. After the EU's next Multiannual Financial Framework 2021-2027 and the Recovery Plan receive the green light from the European leaders, then the project will be adjusted as agreed between them, announced the Commission, which has to present a new draft annual budget by 30 June. In this regard, the leaders of the EU Member States will meet in Brussels to hold a summit on 17-18 July, hoping to reach a consensus not only on the budget proposal for 2021, but for the MFF as well.

However, such a compromise depends mostly on their position on the rescue package. Adoption of the EU budget requires unanimity from the 27 Member States and subsequent approval by the European Parliament, but a number of Member States disagree with some of the conditionality of the recovery fund.

In an attempt to smooth over differences, French President Emmanuel Macron paid a special visit to The Hague, where he met with Dutch Prime Minister Mark Rutte. Rutte has led a coalition of fiscally conservative northern European countries opposed to the proposed recovery fund, which would see the EU raise debt and transfer cash to the countries hardest hit by the economic fallout of the coronavirus crisis. He thus wants the transfers to take the form of repayable loans rather than grants.

“This exchange made progress,” a French official told Reuters, adding that the objective remained to achieve a European accord by the EU summit in July.

“We have always been able to find constructive agreements with the Dutch prime minister,” Macron himself said on Twitter after the meeting. “We have European fibre, we know that we are stronger together. I am confident that we will find common ground on the European recovery plan.”

Nevertheless, the prospects of a swift deal remain slim.

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