They arrived at ten in the morning and got up at eleven-thirty at night. Locked up, the 27 leaders of the EU, to discuss the recovery fund to get out of the economic and social collapse of the coronavirus, and also about the EU budgets for 2021 and 2027. And on that first day they ended as they arrived: without agreement. And unanimity is needed: that is, a single leader is enough to block the negotiation.
Spain is playing at the European summit recovery after the crisis against the blockade of the Netherlands
It is true that this Friday morning both the Dutch Prime Minister Mark Rutte and the German Chancellor Angela Merkel noted the “great divisions” and the “difficulty of the negotiations.” Indeed, negotiation is complex. If it is usual that several meetings are needed to agree on the Multiannual Financial Framework –the EU budget–, because everything is discussed: its size, the contributions of each country, what is received, where the aid goes, what sectors, if it is to go to agriculture or to the digital transition, etc … To this negotiation to distribute more than a trillion euros over seven years, the recovery fund of 750,000 million has been added, 190,000 of the which are added to programs of the financial framework. 750,000 million in an unprecedented architecture in the EU: financed with debt that the Commission issues in the markets and whose repayment is expected to be made with new community own resources – digital tax, carbon tax, multinationals, single-use plastics …-.
In principle, all the members of the room have already accepted this new mechanism. But it is the only thing they agree on. Because the self-described frugal –Holland, Austria, Sweden and Denmark– plus, in some cases, Finland, discuss everything else: the volume of the fund, the proportion between loans –250,000 million– and grants –500,000– and the amount of the multi-annual budget –1,074 billion that they would like to downgrade to 1,050–.
Among them, the most extreme are being Rutte himself and the Austrian chancellor, Sebastian Kurz. Rutte, at the start of the first day of the summit, at midnight, he has recognized: “The atmosphere has become more sour throughout the day, and that is not a good sign.” And because? Because the Dutch Prime Minister, as he himself assumes, is staying only on two fundamental arguments: that unanimity is required to disburse each item of the fund, because that would make it very little operative in a moment of urgency for the more than 180,000 deaths in Europe due to coronavirus and economic collapse. And that the money is not only linked to reforms – “of the labor market and pensions”, he confirmed this Friday -, but does not disburse until those reforms have been verified. “The irritation grew in the rest”, Rutte admitted.
The same Austrian chancellor, who during dinner tweeted that his government “very clearly rejects” the proposal for a $ 500 billion grant fund: “Our core demand is that we must not end a long-term debt union. Of course, we want to show solidarity, but we also have the interests of Austrian taxpayers in mind. Therefore, our position is that we clearly reject the current proposal for the recovery fund, which provides for transfers worth € 500 billion. ”
Hours before, in the morning, Kurz launched the following message to southern countries: “The relevant question will not be in a few years if it took a week or so to reach an agreement. The relevant question will be: has the money really gone where we wanted? It is about what the money is used for. And if the money is not used to invest in the future, if it does not go hand in hand with the necessary reforms in countries that have broken systems or major problems, then it will vanish. That is what matters. And we should focus on that. ”
And if the Netherlands or Austria do not move, the summit will fail this weekend. “We are at a difficult time in the negotiations, at a standstill on the issue of governance of the recovery plan. We are waiting to know if there is a way out,” explained a diplomatic source on Friday night.
Late in the evening an alleged draft of the President of the European Council began to circulate to try to unblock the situation. A diplomatic source sensed that Rutte might need an exit to reinforce the conditionality of the reforms and thus abandon the castling on unanimity for disbursements. But Michel’s proposal, along these lines, did not seem to convince the Dutch prime minister.
Michel’s idea, according to the Financial Times, it was that decisions on recovery fund payments would be suspended if there was no “consensus” between governments: if an unspecified number of Member States had reasoned against opposition to a national recovery plan, or the achievement of targets according to As assessed by the European Commission, payments cannot be made until the European Council “satisfactorily addresses the matter”. It is about giving Rutte a kind of emergency brake that he can sell in his country with the confidence that it will never be used. But even so, the Dutch claim that the brake should be activated with the mere opposition of a single Member State, and that payments should stop until the European Council issued its conclusions.
“In unanimity we would not be willing to give in,” say Spanish sources, “unanimity is not wanted by anyone. The Netherlands is alone. Not even the rest supports it.” The main topics of debate within the room have been: the volume of the multi-year budget –1.074 billion that the frugal want to make it 1,050–; the need for own resources for debt repayment; the rebates – financial compensation for net taxpayers – that Spain does not want and was planning to remove after Brexit but that Charles Michel has reintroduced in his proposal; the 750,000 million in the recovery fund that the frugal want to reduce – both its amount and the proportion of transfers in relation to loans; fund governance; the terms in allocation, which Spain wants to be as soon as possible; when the principal of the debt begins to be repaid – Spain wanted in 2028, but Germany prefers earlier -; and the criteria for the distribution of money from the recovery fund – the weight of GDP, unemployment, etc. -.
“The toughest issues have been governance and the ratio of loans and transfers,” explains a diplomatic source: “The frugal want to drop 500,000 million, and in governance Rutte has remained unanimous. Spain, Italy and many others They have argued that unanimity cannot be, it needs to be agile, that it encourages reforms and is efficient. ”
This Saturday at 11.00, the leaders are scheduled to meet again to continue the negotiation. “Everyone has to give in,” explains a diplomatic source: “If not, it would not be a negotiation, you send a doll, or a paper. The European Council is important, they are all there, many hours in a row, and everyone will have to make concessions. The important thing is to reach an agreement. ” But, for that, unanimity is required. And, for now, the blockade of the Netherlands and its allies not only heats the European summit of recovery, but threatens to make it fail.