16 Jul The sudoku of European negotiations
A key European Council meeting will be held next weekend in order to define a common response to the current crisis. Unsurprisingly, the debate preceding the summit is a bit confusing. Issues of intergovernmental competence are being interspersed with those that are not and procedures that demand unanimity are being mixed with other procedures that only require a qualified majority. As such, it is vital to clarify the framework of the negotiations and the debates occurring in each one of the European institutions. Let’s have a look.
The European Council is negotiating a political agreement on the Multiannual Financial Framework (MFF) for 2021-27, the Own Resources Decision to finance these policies and the new instrument for common debt – the Next Generation EU– which will issue €750 billion in funds. In terms of the latter, a part of this debt will contribute to ordinary programs of the EU such as cohesion policy or the Rural Development Fund. However, the bulk of these funds will finance the new Recovery and Resilience Facility (€560 billion), which concentrates the majority of the debate in the European Council. In essence, a few countries are seeking to impose conditionality and exclusive intergovernmental control while the majority aims for a more flexible model. As with the MFF and the Own Resources Decision, the Next Generation EU and the Recovery and Resilience Facility are subject to very distinct approval procedures, which bring a strategic complexity to the negotiations.
To begin with, even if the MFF and the Own Resources Decision have to be approved by unanimity in the Council of the EU, the processes of debate and ratification of both instruments are not homogenous, nor do they go hand-in-hand. For example, the MFF must also be approved by the Parliament while this is not the case for the Own Resources Decision.
For its part, the Next Generation EU draws on Article 122 of the Treaty on the Functioning of the EU, which requires an agreement in the Council of the EU, but only through a qualified majority. It is important to keep in mind that the so-called frugal four countries (the Netherlands, Austria, Denmark and Sweden) cannot achieve a blocking minority by themselves.
Finally, in the case of the Recovery and Resilience Facility the legal basis used is Article 175 of the Treaty, which defines the Council and Parliament as co-legislators. In this way, the attempt of some countries to pre-define the scope and major characteristics of this instrument is completely extemporary. The Parliament will legislate, with full autonomy from any decision taken by Member States, on the model of supervision, the systems of disbursement or the question of conditionality. Subsequently, negotiations between the Parliament and the Council will be necessary, with the assistance of the Commission, but the result cannot be predetermined by the European Council.
However, even not having a blocking minority, the frugal countries are putting the entirety of the financial package at risk, insofar as they can block the approval of the MFF that requires unanimity. However, if these countries exercise their right to veto and the MFF must be delayed, they should be aware of the fact that the Own Resources Decision agreement must also be deferred, meaning that the national “rebates” from the EU budget (from which they are currently benefitting) will expire as well. While the Own Resources Decision could be approved without an agreement in the MFF be reached, it is highly implausible that a country that vetoes the MFF would also secure unanimity to ensure their “rebates” are kept. Thus, a veto would not be free of cost.
Moreover, this small group of countries is also threatening the approval of the Next Generation EU. In fact, even if the Council does not need unanimity to decide on this instrument, it would certainly be a high political risk to forge ahead with the issuance of debt without global consensus. This would effectively lead to a blocking of the decision not only on the MFF but also on the Own Resources Decision, which, I repeat, would imply the end of the national rebates.
In any case, the intention of the frugal four to condition the implementation of the Recovery and Resilience Facility is the most incongruent part of all. Without a doubt, the European Council will be able to reach an agreement without the need for unanimity. However, the Parliament, as full co-legislator, will not feel constrained by those possible pacts between governments and will be able to review the entirety of the Commission’s proposal. This will require a later negotiation between co-legislators, keeping everything open for now.
To sum up, it is not in the hands of the frugal governments to decide about the overall recovery package. The principal instrument, the Recovery and Resilience Facility, depends critically on the Parliament’s position, which will act responsibly and autonomously. In the same way, the approval of the MFF, the Own Resources Decision and the Next Generation EU, totally in the hands of the Council, provide, nonetheless, several ways by which to counter potential vetoes by some Member States. It is important to keep alert.
You can read this text in Spanish at El País website by clicking here.