Recovery and Budget Plans

Portuguese Prime Minister António Costa met with Hungarian Prime Minister Viktor Orbán in the lead up to the European Council, as reported by O Jornal Económico.  The meeting has left Costa with the belief that rule of law 'must be dealt with in its own place' and not in conjunction with the EU recovery plan. Costa left his meeting with Orbán feeling that a lack of dialogue was an obstacle to the establishment of commitments from both parties. While their talks did address the issue of rule of law in Hungary and the possible conditioning on access to EU funds, Costa still believes they should be analysed separately. Instead, rule of law violations should be addressed under the terms of the Treaty, based on Article 7. 'Values are not bought', Costa warned. The only issue when it comes to the Recovery Fund will be ensuring that European funds are properly invested. Costa also spoke to Orbán about Portugal being placed on Hungary’s red list of travel recommendations and hoped he would reconsider, given all the effort Portugal has put into testing. Costa believes that an agreement  on the Recovery Fund will be reached this weekend.

La Repubblica writes that the 'frugal four' would benefit from Italy’s request to use the EU funds in 2021 and 2022, pointing out that their goal is to link the Recovery Fund exclusively to the COVID-19 crisis, so that this stimulus package does not turn into a permanent tool in the hands of the European institutions. The editorial highlights that the Italian government should make use of these funds to weather the immediate economic consequences of this pandemic in the short term, and then plan the actual recovery of the country in the next five years – a country which entered a recession before the outbreak of the pandemic and whose economy has not grown consistently in the last twenty years. The European Council is Italy’s very last chance to strike a deal, which gives room for manoeuvres to put in place long-term reforms and investments necessary to relaunch the economy.

Dutch Prime Minister Mark Rutte is the biggest obstacle that the European Recovery Fund will face this weekend. Negotiations will be focused on the consensus proposal tabled last week by the President of the European Council Charles Michel. While all delegations have drawbacks and nuances to Michel’s numbers, the only insurmountable qualifications and demands are those raised by the Netherlands. According to El Pais, the Rutte government requires that future disbursements of the fund be approved unanimously by the 27 Member States, a condition that is unacceptable to the vast majority of partners. There is fear that because each country has a veto right, this will jeopardise the fund. Brussels believes that to revive the European economy, 60% of its resources must be injected in around two years. Requiring unanimity would make the fund vulnerable to the blocking of any partner or the blackmail of a partner threatening to veto in order to achieve concessions in other areas. Germany has offered a compromise of sorts, in which approval by qualified majority is needed to receive the aid – which will be disbursed by the Commission at the behest of the Council. Rutte is backed by Sweden, Austria, and Denmark, making them the 'frugal four'. But the other three might settle for a reduction of the fund’s appropriation for subsidies, making Rutte the biggest challenge.

Vice-President of the European Commission Věra Jourová believes that the Coronavirus Reconstruction Fund and the Multiannual Financial Framework give the EU an opportunity to enforce rule of law mechanisms. By her argument, the EU money should be tied to the functioning of a constitutional state. The Czech Commissioner concluded that it was ‘now or never’ when it comes to enforcing rule of law. The Summit will take place today and tomorrow and will be centred around a financial package of 1.8 trillion euros. This EU financial framework will last from 2021 to 2027 and include over a trillion euros as well as a relief fund of 750 billion euros to alleviate the economic consequences of COVID-19. As ORF reports, Jourová believes that in cases of systemic deficits in the rule of law, the current threshold for withholding funds – a qualified majority – is too high. The threshold must be lowered to ensure the enforcement of rule of law mechanisms. Hungarian PM Viktor Orbán has already threatened to veto the financial package if the funding is linked to rule of law.