Breakthrough on EU budget and associated COVID relief fund

After four months of intense negotiations, the European Parliament and member states agreed details of a €1 trillion ($1.3 trillion) 2021-2027 budget Tuesday. The deal came after wrangling over spending priorities agreed to at a marathon summit in July.

EU Council presidency spokesman Sebastian Fischer called the agreement "a deal for Europe."

Approval of the budget signals a step toward initiating the EU's €1.8 trillion green energy and digitalization investment, but more crucially right now, it frees up a coronavirus financial recovery package worth in the region of €750 billion.

German Foreign Minister Heiko Maas tweeted: "Getting Europe's economic recovery off the ground is at the heart of our European Council Presidency. Today we have come a huge step closer — a silver lining for all citizens and companies."

Raising revenue to pay for pandemic relief

The budget establishes new revenue structures to repay €750 billion in debt the EU will take on to finance coronavirus assistance and recovery. "By 2026, we will have a basket of new revenues that should be sufficient to cover the cost of the Recovery Fund's debt with the aim of not having cuts in funds and programs," said parliamentary negotiator Jose Manuel Fernandes said.

In all, the new €1.1 trillion budget adds €16 billion for health, education and security over the July budget agreement. The current German EU presidency says only €12.5 billion of that is fresh money, claiming most new income will accrue from competition fines previously channeled to individual member states.

Over the coming weeks, EU lawmakers and governments will continue to hash out the details of that €750 billion in coronavirus borrowing, of which €672.5 billion will be distributed to member states as loans and grants based on national recovery plans.

Read more:   Opinion: EU coronavirus deal is the wrong answer for Europe

Financial assistance and the rule of law

Overall, the EU parliament wants more budgetary cash to be earmarked for projects that help reduce CO2 emissions, whereas member states want national recovery funds, which governments can apply for, to be made available for four years rather than just three.

One condition for receiving EU financing is that the recipient must observe the rule of law — a condition that EU member states Poland and Hungary opposed.

"The budget, the Recovery Fund, new revenues and the rule of law conditionality are one package for us," as senior budgetary parliamentarian Siegfried Muresan of the center-right European People's Party Group (EPP Group) told Reuters news agency.

Once governments and parliament reach agreement on the details, the deal can be ratified by national parliaments in the EU's 27 member states. The money is to start flowing in the second half of next year.

Read more:  EU agrees to link rule of law to budget fund access

js/msh (AFP, dpa, Reuters)