EU leaders agree on budget and Recovery Fund

The leaders of the European Union, after around 90 hours of negotiations, came to an agreement on the EU budget for years 2021-2027 and for the Recovery Fund aimed to support the economies struck by the crisis caused by the SARS-CoV-2 coronavirus pandemic.

The Recovery Fund will consist of EUR 390 bn in grants and EUR 360 bn in loans. It will be attached to a Multiannual Financial Framework, the budget of the Union for 2021-2027, worth a total amount of EUR 1.074 trillion. The leaders of 27 countries agreed to it unanimously at around 5:30am CEST on Tuesday.

We did it! We have reached a deal on the recovery package and the European budget for 2021-2027.

This is a strong deal. And most importantly, the right deal for Europe right now. #EUCO pic.twitter.com/c6fQ5ppwpf

— Charles Michel (@eucopresident) July 21, 2020

“PM Mateusz Morawiecki has negotiated the largest funds from the EU for Poland in history. Simultaneously, thanks to cooperation with, among others, Hungarians, the arbitral political mechanisms concerning the budget restrictions were blocked,” Piotr Müller, the spokesman of the Polish government tweeted.

“The agreement gives Poland more than EUR 124 bn in direct grants and, along with privileged loans this is a total amount of EUR 160 bn in current prices for our country,” PM Morawiecki said.

He added that during the last round of the negotiations, Poland negotiated an additional EUR 600 mln for regions that need funds for developing the most. “These last hours of this marathon were fruitful because we received additional funds,” he stressed.

One of the issues that were a bone of contention between the Member States was associating the funds paid with the rule-of-law. According to “Politico”, after the long-lasting negotiations the rule-of-law was removed from the agreement, but a control mechanism remained.

“The Union's financial interests shall be protected in accordance with the general principles embedded in the Union Treaties, in particular the values of Article 2 TEU,” the document published by the European Council reads.

However, there are different opinions on the matter. Polish and Hungarian PMs, Mateusz Morawiecki and Viktor Orbán claim that to trigger this control mechanism unanimity of all the Member States is required and therefore nothing could be done without the agreement of Poland, Hungary and others to such actions. “The reason why we succeeded was that Mr Morawiecki was the leader of the Visegrad Group, our team,” Mr Orbán said.

On the other hand, Charles Michel, the head of the European Council, said that “this is the first time that the respect for the rule of law is a decisive criteria for budget spending.”

“The European Council underlines the importance of the protection of the Union's financial interests. The European Council underlines the importance of respect of the rule of law. Based on this background, a regime of conditionality to protect the budget and Next Generation EU will be introduced. In this context, the Commission will propose measures in case of breaches for adoption by the Council by qualified majority,” the conclusions to the document read.

“It is very clear in the document, a very clear commitment to the rule of law, and a very clear commitment to the protection of the financial interests of the Union,” Ursula von der Leyen, the head of the European Commission said.

An EU official was quoted anonymously by “Politico” as saying that the purpose of making the entry about rule-of-law unclear was “to help Mr Orbán save face.”

Conclusions of the summit can be read at the European Council website.