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Europe is presented with a ‘bitter pill’

by
31 July 2020

Its new budget comes at a moral cost, and is in danger of sacrificing its core values, argues Alexander Faludy

“WE DID it! Europe is strong! Europe is united!” exclaimed an improbably energetic Charles Michel to a Brussels press conference at 6 a.m. on Tuesday of last week. The EU Council President’s relief at finalising a seven-year budget and post-coronavirus economic recovery plan was evident. In subsequent days, however, enthusiasm for the deal has proved significantly less contagious than Covid-19 — and for good reasons.

Agreeing a budget at all was an achievement. Last week’s talks were among the most arduous in EU history: scheduled for two days, they spilled over four. During plenary discussions, 33 participants (heads of 27 European countries, plus EU officials) socially distanced across a room with capacity for 310. The ideological gap between some participants was even wider.

A Dutch-led group of net-contributor countries (the so-called “Frugals”) demanded veto powers over EU aid to partner states to ensure a wise use of funds. These conditions were fiercely resisted by countries with vulnerable economies, such as Italy and Spain.

This fractious background set a formidable challenge for M. Michel (formerly Prime Minster of Belgium) to overcome. Throughout the summit, he worked with the German Chancellor, Angela Merkel, and the President of France, Emmanuel Macron, to mediate between interests.

A €70-billion revenue dip post-Brexit notwithstanding, a budget of €1.074 trillion (down only €8.3 billion from 2014-20) was agreed. Losses were absorbed by redistributing contribution obligations among members, and creating new “own resources” for the Commission: taxes belonging to the EU, but collected for it by national governments.

 

EU LEADERS broke new ground by authorising the Commission to part-finance a €750-billion crisis fund by direct borrowing on its own account. Although not the full mutualisation of debt among members which some federalists aspire to, the move is bolder than anything that seemed possible before the crisis.

The post-Brexit multiannual financial framework (MFF) is less drastically reduced than some feared, but diverges more significantly from the Commission’s pre-coronavirus proposal (€1.136 trillion) than many hoped. The coronavirus recovery fund could not be financed from borrowing and taxation alone. A reduction of the proposed main budget entailed heavy cuts to environmental and health programmes.

Previously, a comprehensive strategy for carbon neutrality across Europe promised to augment EU self-understanding as a community of values. Budgetary allocation for a Just Transition Fund (JTF) — assisting high-carbon economies to jettison fossil fuels — has now shrunk, however, from €40 billion to €17.5 billion.

“The decrease in JTF is not helpful: it is stupid,” the Green MEP Bas Eickhout said. Reductions offer aneasy argument” for reluctant states to abandon emissions goals, the Dutch politician told the Financial Times.

Strengthening the EU’s capacity for health-policy intervention is an established signature priority for the President of the Commission, Dr Ursula von der Leyen (a German medical doctor). Her administration’s commitment to health care was accentuated after the pandemic revealed significant problems of co-ordination, and starkly uneven capacity, across the bloc.

On 28 May, the Health Commissioner, Stella Kyriakides (Cyprus), unveiled the Commission’s projected initiative, EU4Health: an “ambitious stand-alone programme” with a projected budget of €9.4 billion. The project is intended to build stronger systems for dealing with cross-border health threats, including pandemics.

Crucially, it was set to contain a strong social-justice element: directing funds towards alleviating “inequalities in health status among population groups . . . and access to affordable, preventive, and curative health care”. It is uncertain how much of this programme can be delivered after EU4Health’s allocation was slashed by 81 per cent to just €1.7 billion

 

ON THURSDAY of last week, a disappointed Dr von der Leyen addressed a special session of the European Parliament. She admitted that the “MFF is a difficult pill to swallow. . . I know this house feels the same.” The parliament’s approval is required, and there are signs that it may fight back.

“Ursula, we are not ready yet to swallow the bitter pill,” Manfred Weber, the leader of the moderate-conservative EPP group, the parliament’s largest caucus, said. MEPs approved a resolution stating that they were “prepared to withhold consent” until “satisfactory agreement” was reached.

A different controversy surrounds the budget’s approach to rule-of-law conditionality. For years, lawmakers have worried that generous EU subsidies reward, even enable, authoritarian consolidation in Central-Eastern Europe. In 2019, a New York Times investigation adduced substantive evidence that EU money was being used to bolster political clientele networks in Hungary and Czechia.

The MFF now contains a clause nominally tying subsidy remittance to rule-of-law compliance. The wording is tortuously convoluted, however, and so risks inoperability — a concession to targeted governments to forestall a possible budget veto.

Professor Daniel Kelemen, a specialist in EU politics at Rutgers University, New Jersey, says: “The EU has signalled to autocrats like Orbán that they can violate democratic norms with impunity and still get billions in EU funds. That will encourage further backsliding. . . The authoritarian rot will spread to other countries.”

Overall, the moral cost of the EU budget appears worryingly high.

 

The Revd Alexander Faludy is a freelance journalist. He lives in Budapest and Cambridge.

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