New factions emerge in EU recovery fund fight
Tussle for billions upends alliances.
By LILI
BAYER 6/16/20, 12:50 PM CET Updated 6/17/20, 4:57 AM CET
A new web of alliances is taking shape as EU members
wrangle over billions of euros intended to fuel Europe's post-coronavirus
recovery.
Traditional
friendships are being tested as governments start negotiating over the European
Commission's proposal to borrow money on the markets and create a four-year
€750 billion recovery fund, to be added to the EU's long-term budget. The
battle will move to a higher level in a videoconference on Friday when EU
leaders debate the plan for the first time.
The fight
over the 2021-2027 budget had already been raging for years and clear camps had
emerged. A group of southern and eastern countries pushed for a bigger budget,
as well as defending regional development cash — known as cohesion funding —
and agricultural subsidies. The group enjoyed the support of France on some
fronts, particularly on payouts for farmers.
Meanwhile,
a group of self-described frugal countries, oftentimes with the support of
Germany, was pushing for a smaller post-Brexit budget and a focus on modern
programs like research.
But the
COVID-19 crisis and the Commission's recovery proposal has upended this map of
alliances, creating a more fragmented negotiation where countries move in
different factions depending on the particular question at hand.
"There is no clear justification for providing
grants (rather than loans) from the Recovery and Resilience Facility" —
Dutch government letter
Much of the
debate centers around two key issues: the balance in payouts between grants and
loans, and what criteria should be used to determine how much money each
country will receive.
Here are
five new factions emerging in the recovery funding debate.
The 'loans for loans' gang
Austria, Denmark, Finland, Netherlands, Sweden
While
member countries appear to agree that a compromise will ultimately include a
mix of loans and grants, a fight is raging on the balance between the two.
Governments
have clashed over the Commission's proposal that the bulk of the €750 billion
pot should be distributed as grants to member countries, while only around a
third would be paid out as loans.
Under the
Commission's plan, the money allocated as grants would still need to be paid
back — but not by the member countries who receive the cash. Instead, the
repayments would come from the EU budget as a whole, over a period of 30 years
starting in 2028.
A group of
the traditional frugal countries, joined by Finland, wants a greater portion of
the EU's borrowed cash to be distributed via loans to member governments. Those
countries themselves would then be responsible for paying the money back.
"There is no clear justification for providing
grants (rather than loans) from the Recovery and Resilience Facility," the
Dutch government wrote in a letter to its national parliament last week.
Hungary has
also expressed support in Brussels for the loans-for-loans concept, but now
appears to be warming up to grants.
The grants gang
France, Germany, Czech Republic, Greece, Italy,
Portugal, Spain
Paris and
Berlin have called for a €500 billion recovery fund that would provide grants
to member countries — an idea that was warmly welcomed in Southern Europe,
where highly indebted countries prefer EU transfers over more loans.
The idea of
grants also has support in parts of the bloc's east — though some leaders are
nervous about the vast size of the Commission's proposal and the joint
responsibility for the repayment of borrowed cash distributed as grant money.
"If we
want to support states that have a problem with too much debt, we probably
won't be of much help if [we] increase this debt by means of loans," Czech
Prime Minister Andrej Babiš wrote in a recent analysis of the Commission
proposal. "I support grants but in a reasonable overall volume."
Criteria critics I: Wealthy westerners
Austria, Denmark, Finland, France, Ireland,
Luxembourg, the Netherlands, Sweden
Much of the
work that EU governments have been doing so far is trying to understand the
formulas the Commission has proposed for distributing cash — and figuring out
whether they are winners or losers.
Ambassadors
have already engaged in an intense debate over a proposed €310 billion pot of
grants which would be available under the new fund's Recovery and Resilience
Facility, a program to support investments and reforms. According to the
Commission's plan, these grants would be distributed using a formula that would
take into account unemployment between 2015 and 2019, population size and GDP
per capita.
This group
of relatively wealthy countries is arguing the allocation criteria, especially
for the Recovery and Resilience Facility, should better reflect the direct
impact of the COVID-19 crisis.
"We need a clearer analysis of why and where the
money is really needed as a result of the corona crisis. And how this money is
going to ensure that all member states come out of this crisis stronger than
before," Dutch Foreign Minister Stef Blok told POLITICO last week.
The
recovery instrument should target "the countries most affected by the
COVID-19 crisis," the Danish government wrote in a paper.
The view is
shared across numerous member governments beyond the Frugal Four, in particular
those who feel that the proposed allocation for their countries does not
reflect the economic damage inflicted by the crisis.
"One
area of concern for us would be that this New Generation [recovery] fund as
it's been proposed is being based on pre-COVID figures around individual
economies," Irish Minister for European Affairs Helen McEntee told RTÉ
Radio One last week.
"The
people of this country have spent a lot of time making sure that we are now in
a very good position, or that we were in a good position pre-COVID,"
McEntee said, adding that Ireland is "hoping to get as much support from
this as possible" and that PM Leo Varadkar will raise the issue of
allocations during the leaders' videoconference.
Ireland is
set to experience a fall of 7.9 percent in its GDP this year, according to the
Commission's spring forecast, and will qualify for €1.2 billion out of the €310
billion in grants under the Recovery and Resilience Facility, according to the
Commission's proposal.
Further
complicating the negotiations is the fact that the Commission has put forward
another formula for a €50 billion cohesion program, REACT-EU, which would take
into account GDP, unemployment and youth unemployment from 2020 and 2021 — data
that does not exist yet, making it impossible for countries to calculate how
much they would receive.
Criteria critics II: Anxious easterners
Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Romania, Slovakia
Eastern
members are also critical of the Commission's formula — but for different
reasons. They are concerned that too much money will go to Southern Europe,
even though countries in that region are wealthier than they are.
According
to the Commission's projections, Hungary would receive €6.1 billion in grants
under the Facility, compared with €12.9 billion for Portugal, while the
population of Portugal is only slightly higher than that of Hungary.
The "Recovery
and Resilience Facility key needs to be adjusted," said one diplomat from
an eastern member state. "Unemployment should not be in the key."
A number of
Eastern European states have lower unemployment rates than Southern European EU
members but also have lower GDP per capita than those countries.
Speaking at
a meeting of leaders from the Visegrad Four group of Central European countries
last Thursday, Slovakia's Prime Minister Igor Matovič said that "we should
avoid a situation wherein a country with more or less the same population and
more or less the same GDP per capita situated in Southern Europe will profit
from the program far more than a Central European country."
One outlier
is Poland, which is set to be among the Commission plan's top beneficiaries.
While Warsaw has signaled its support for its fellow Visegrad countries, it has
also not fully challenged the proposal from Brussels.
Asked
whether Poland is happy with the proposed allocation methodology, Finance
Minister Tadeusz Kościński told POLITICO: "Mostly yes, but not completely.
We will be negotiating this."
Commission's southern comforters
Cyprus, Italy, Greece, Portugal, Slovenia, Spain
Some
countries say that the Commission's allocation formulas may not be perfect,
but, given time constraints and the economic impact of the crisis, governments
should broadly accept its approach.
Southern
countries benefit significantly from the way in which the Commission designed
its plans. Together, Italy and Spain qualify for over 40 percent of the
Recovery and Resilience Facility's €310 billion in grants.
Asked if
Greece is satisfied with the Commission's proposed allocations, Miltiadis
Varvitsiotis, Greece’s deputy minister responsible for European affairs, told
POLITICO that "so far we view the proposal in a positive way."
For some
officials, speed matters more than numbers.
"At
the end, it might be better to focus on doing things fast than doing them
perfectly," said one diplomat. "Of course everybody can find reasons
to complain," the diplomat said, adding that at the end of the day
"you have to see everything as a package."
There are
concerns that any changes to the allocation keys at this stage could jeopardize
the chances of a deal in July.
"We
don't have magic," said another diplomat. "Changing the formula is
simply the perfect recipe for delay."
Jacopo Barigazzi and Barbara Moens contributed reporting.
Sem comentários:
Enviar um comentário