The European Council that began today in Brussels will be decisive for the fate of the post-Covid Union. Compared to the last summits, there are two structural innovations. First of all, today is the first meeting since the outbreak of the pandemic in presence, therefore the negotiation can also proceed through corridor talks, behind the scenes, made impossible so far by meetings via streaming. Secondly, this Council meeting is the first to be held under the rotating presidency of Germany. Chancellor Angela Merkel has already clarified several times that she intends to close the negotiations by July to avoid dangerous postponements to September which would expose several countries (Italy above all) to an August of passion on the markets. However, given the distance between the positions on the pitch, another meeting may be needed to be convened next week.
THE THEMES ON THE TABLE
There are two major issues on the table, which are closely connected: the 2021-2027 budget of the European Union, on which the leaders failed to reach an agreement last February, and above all the Recovery Fund, the financial bazooka designed to stem the crisis and trigger the recovery. On both fronts, the starting point for the negotiations is a draft agreement signed by Charles Michel, president of the European Council.
THE EU BUDGET
As regards the budget, the document envisages spending commitments of 1.074 billion euros. This is a rather low value, equal to 1,05% of EU GDP, but already five months ago - before the Covid emergency - the so-called Frugal Countries (Holland, Austria, Sweden and Denmark) were asking for a reduction to 1 %. To convince them, Michel inserted the confirmation of the rebates, i.e. the discounts on the budget (considered by many anachronistic) for the benefit of the four Frugals (plus Germany). But that's not to say it's enough.
RECOVERY FUNDS: GOVERNANCE
On the Recovery Fund side, the most heated political debate concerns governance, i.e. the mechanism by which Europe will approve the national reform plans of the individual countries and give the green light to loans and money transfers.
The most extreme position is that of Dutch premier Mark Rutte, who (hounded at home by the ultra-right and worried about the political elections next spring) would like to make unanimous approval by the European Council compulsory. In this way, each government would have the right to veto the reforms of any other member of the EU. The proposal has no hope of passing, because it is not shared by anyone: even the other three Frugals think that this mechanism would paralyze the Union and put its integrity at risk, since each country could block funding to another whose policies he does not agree with.
On the opposite side of the fence is Italy. At first, Prime Minister Giuseppe Conte pressed to maintain the initial approach, which attributed the responsibility for approving the PNR to the Commission and not to the Council. But then the Italian Prime Minister corrected the shot and now asks that in order to reject the reform plans, the heads of state and government must express themselves by qualified majority (at least 55% of the member countries representing at least 65% of the population ).
It is the opposite of what was proposed by Michel, who in the draft agreement provides for a qualified majority not to reject, but to approve the Pnr. The approach of the President of the European Council is appreciated by France and Germany and is therefore the one that has the greatest chance of passing.
RECOVERY FUND: AMOUNT AND ALLOCATION OF FUNDS
The other big issue related to the Recovery Fund concerns the financial endowment. Michel reiterates the amount and the breakdown proposed by the Commission: 750 billion euros, of which 500 in non-repayable transfers and 250 in very long-term loans with subsidized rates.
The Frugals are against the very concept of "non-repayable funds" and would like the aid to consist only of loans, moreover to be subject to "strict conditionalities" in terms of guarantees on the reforms that each government undertakes to launch. France and Germany, however, defend the transfers of half a trillion, also foreseen by the plan that Paris and Berlin had presented even before the Commission's proposal.
According to rumors circulating in recent days, to reach a compromise Merkel could propose a cut of 100-150 million on the loan side, reducing the endowment of the Recovery Fund to 600-650 million. But, even in this case, it is by no means certain that the attempt at mediation is enough to convince the Frugals.
