Europe has been hit by a second wave of coronavirus’ cases after summer ended, and this is derailing governments’ hopes of an economic recovery in the last quarter of 2020.
To make the situation even more complicated, the EU 7-year budget (2021-2027), worth a total of €1.8 trillion, hasn’t been finalized yet due to ongoing rebuttals from Hungary and Poland, concerned about the rule of law’s clause.
Budget talks’ initial impasse and concessions to the frugal countries
On July 17th, European leaders met in Brussels for the first time since February to discuss and find an agreement on the €750bn economic recovery proposed by France and Germany. The package was needed to help the countries more heavily damaged by the coronavirus pandemic, mainly the southern countries like Spain and Italy.
These talks, however, quickly stalled due to splits over the rules to follow in giving countries these unprecedented amounts of money. Particularly, many prime ministers and presidents were against the position taken by Mark Rutte, the Dutch prime minister, who insisted on adding a national veto on grants and loans. Mr Rutte believed in the need of a greater degree of surveillance in the countries benefitting from the economic relief fund, and he stood firm on the idea that those countries had to implement austerity measures after the crisis ended in order to improve their debt amount.
After an initial impasse, European leaders finally reached a deal on a €390 billion system of grants, with the remaining of the €750bn going into loans to member states. This was a great achievement, but the amount dedicated to grants was substantially lower than the sum of €500bn originally brought to the table by France and Germany.
Leaders had to settle at a lower amount following days of disharmony with the so called “frugal” states, that is Austria, the Netherlands, Sweden and Denmark. These 4 countries were the ones who opposed the idea of having the European Union borrowing money in the capital markets and then giving it to the member states badly affected by the pandemic crisis. Then they opposed the original €500bn program of grants, and finally settled at €390bn.
Even after obtaining a reduced amount of grants, they still argued that they had to receive a higher amount in yearly budget rebates (the rebates first introduced by Margaret Thatcher for UK’s membership in the EU). This was agreed upon between the member states, and countries like Austria and the Netherlands saw an increase of roughly €400m in yearly rebates.
In addition to the €750bn recovery fund, EU leaders also started the negotiation of the next EU’s 7-year budget, which will come down to about €1.074 trillion.
To make the situation even more complicated, the EU 7-year budget (2021-2027), worth a total of €1.8 trillion, hasn’t been finalized yet due to ongoing rebuttals from Hungary and Poland, concerned about the rule of law’s clause.
Budget talks’ initial impasse and concessions to the frugal countries
On July 17th, European leaders met in Brussels for the first time since February to discuss and find an agreement on the €750bn economic recovery proposed by France and Germany. The package was needed to help the countries more heavily damaged by the coronavirus pandemic, mainly the southern countries like Spain and Italy.
These talks, however, quickly stalled due to splits over the rules to follow in giving countries these unprecedented amounts of money. Particularly, many prime ministers and presidents were against the position taken by Mark Rutte, the Dutch prime minister, who insisted on adding a national veto on grants and loans. Mr Rutte believed in the need of a greater degree of surveillance in the countries benefitting from the economic relief fund, and he stood firm on the idea that those countries had to implement austerity measures after the crisis ended in order to improve their debt amount.
After an initial impasse, European leaders finally reached a deal on a €390 billion system of grants, with the remaining of the €750bn going into loans to member states. This was a great achievement, but the amount dedicated to grants was substantially lower than the sum of €500bn originally brought to the table by France and Germany.
Leaders had to settle at a lower amount following days of disharmony with the so called “frugal” states, that is Austria, the Netherlands, Sweden and Denmark. These 4 countries were the ones who opposed the idea of having the European Union borrowing money in the capital markets and then giving it to the member states badly affected by the pandemic crisis. Then they opposed the original €500bn program of grants, and finally settled at €390bn.
Even after obtaining a reduced amount of grants, they still argued that they had to receive a higher amount in yearly budget rebates (the rebates first introduced by Margaret Thatcher for UK’s membership in the EU). This was agreed upon between the member states, and countries like Austria and the Netherlands saw an increase of roughly €400m in yearly rebates.
In addition to the €750bn recovery fund, EU leaders also started the negotiation of the next EU’s 7-year budget, which will come down to about €1.074 trillion.
The situation wasn’t completely solved, however, because of the position taken by western countries about the importance of the rule of law, and its link to how the recovery fund money will be finally distributed. Western European countries are against the decisions taken by Hungary and Poland, who clearly undermined the independence of the judiciary, the freedom of the press and the fundamental role of the rule of law.
Viktor Orban, Hungary’s premier, and Mateusz Morawiecki, Poland’s prime minister, rebutted the idea of tying money to the rule of law, and threatened to veto a deal which makes this a priority.
Hungary and Poland’s opposition
In July, EU leaders, following 4 days of debates, agreed upon a deal that will allow the European Commission to analyze and stop funding from the recovery program and the 7-year budget to go to those countries who don’t respect the rule of law.
The commission would propose the sanctions to be applied, and then these will have to be approved by member states’ governments under a qualified majority system.
Poland and Hungary, however, opposed this decision and argued that without their support and that of the Czech Republic and Slovakia, this deal won’t pass.
The EU has been pressured in the past few years to do more against the clear breach of the rule of law in Poland and Hungary, but to date it hasn’t been able to intervene decisively, considering also the unsuccessful disciplinary proceedings launched against these 2 countries in 2017 and 2018 respectively. Many EU member states believed that these 2 countries would eventually back down, since they each receive almost 5% of their GDP from Brussels, but this has yet to happen.
Viktor Orban, recently stated, when referring to the deal being tied to EU’s beliefs about the rule of law: “Once this proposal is adopted there'll be no more obstacles to tying member states' funding to support migration and using financial means to blackmail countries that oppose [it]”. Hungary is one of the few countries which denied their help in resettling migrants who cross the Mediterranean. Mateusz Morawiecki, Polish prime minister, argues instead that the European Union is forcing Poland to accept more liberal policies, and is treating them unequally when compared to other countries.
The EU is still looking for a compromise, and Germany, which is currently holding the rotating six-month presidency, is playing a major role in the search.
Cases of coronavirus are rising, and the year is nearing its end, meaning that it is crucial that they agree on a deal, such that the recovery fund money will be made available starting from January 2021.
Antonio Wang
Viktor Orban, Hungary’s premier, and Mateusz Morawiecki, Poland’s prime minister, rebutted the idea of tying money to the rule of law, and threatened to veto a deal which makes this a priority.
Hungary and Poland’s opposition
In July, EU leaders, following 4 days of debates, agreed upon a deal that will allow the European Commission to analyze and stop funding from the recovery program and the 7-year budget to go to those countries who don’t respect the rule of law.
The commission would propose the sanctions to be applied, and then these will have to be approved by member states’ governments under a qualified majority system.
Poland and Hungary, however, opposed this decision and argued that without their support and that of the Czech Republic and Slovakia, this deal won’t pass.
The EU has been pressured in the past few years to do more against the clear breach of the rule of law in Poland and Hungary, but to date it hasn’t been able to intervene decisively, considering also the unsuccessful disciplinary proceedings launched against these 2 countries in 2017 and 2018 respectively. Many EU member states believed that these 2 countries would eventually back down, since they each receive almost 5% of their GDP from Brussels, but this has yet to happen.
Viktor Orban, recently stated, when referring to the deal being tied to EU’s beliefs about the rule of law: “Once this proposal is adopted there'll be no more obstacles to tying member states' funding to support migration and using financial means to blackmail countries that oppose [it]”. Hungary is one of the few countries which denied their help in resettling migrants who cross the Mediterranean. Mateusz Morawiecki, Polish prime minister, argues instead that the European Union is forcing Poland to accept more liberal policies, and is treating them unequally when compared to other countries.
The EU is still looking for a compromise, and Germany, which is currently holding the rotating six-month presidency, is playing a major role in the search.
Cases of coronavirus are rising, and the year is nearing its end, meaning that it is crucial that they agree on a deal, such that the recovery fund money will be made available starting from January 2021.
Antonio Wang