Deadlocked EU talks: What’s at stake at the summit

Leaders hope to form a recovery plan to dig the continent out of the Covid-19 recession

Taoiseach Micheál Martin arriving at the EU summit.

Taoiseach Micheál Martin arriving at the EU summit.

 

What’s on the table as EU leaders meet in Brussels?

A €750 billion recovery plan aimed to dig the continent out of the worst recession in a century is at stake, along with the EU’s trillion euro seven-year budget, amounting to a package of over €1.8 trillion. The pressure is on, but some countries are digging in their heels to demand cuts in the size of the fund.

What is the summit about?

The 27 leaders of the EU member states are gathering to try to reach agreement on a €750 billion recovery fund designed to counteract the deep economic impact of the Coronavirus pandemic, and on the EU’s next seven-year budget.

The current budget runs out in January, and a replacement must be agreed in order for payments to continue on everything from agricultural CAP subsidies, to funding for infrastructure, to medical research.

Are the leaders allowed to travel?

This is the first time that the national leaders have met in person since the pandemic took hold earlier this year.

To try to make the summit safer, the size of national delegations has been cut from 19 to six, face masks are mandatory, and negotiations are held in large rooms and outside on a terrace, with regular cleaning during breaks.

The leaders have held video conferences throughout the pandemic, but felt that face-to-face negotiations were essential to break deadlock over the budget and recovery plan.

What are the sticking points?

The biggest contention points concern the recovery fund. A group of so-called frugal states led by the Netherlands has advocated a cut to the proposed figure of €750 billion.

German chancellor Angela Merkel is chairing talks as her country currently holds the rotating presidency of the EU Council.
German chancellor Angela Merkel is chairing talks as her country currently holds the rotating presidency of the EU Council.

They have also argued that money should be distributed as loans that must be paid back by member states.

The European Commission has proposed borrowing on financial markets to raise the money for the fund, which would then largely be distributed to member states in grants that would not need to be directly repaid.

How would the money ultimately be paid back?

The Commission has proposed that member states grant it the ability to raise its own funds, through a plastic tax, a digital levy, and a levy on imports based on how much carbon is created by their manufacturing.

The plastic tax has broad support, but the other levies are controversial, and Ireland is among the state that may block proposals for a digital tax. Negotiations will focus on nailing down the size and distribution method of the recovery fund first, with ideas about repayment due for discussion in the autumn and next year.

What is Ireland’s view?

Ireland is advocating maintaining farming CAP payments at their current level in the next budget, which is currently due to reduce the amount of such payments.

The Government is keen to secure political agreement for a proposed €5 billion Brexit reserve fund, which would be used to support sectors and countries worst hit by the sudden change in trading terms between the EU and the United Kingdom that will take place on January 1st due to Brexit.

The Government has also argued for a change to the system for distributing the recovery funds, helping to secure a compromise proposal that calculates based on the economic impact of the pandemic rather than solely on economic data from recent years.

Who are the hold outs?

Many EU member states have called for a deal to demonstrate to financial markets and to citizens that the EU is capable of acting quickly and has the crisis in hand.

But unanimity is required and Hungary has threatened to block agreement if funds are made conditional on observance of the rule of law (the government of hardliner Victor Orban has been repeatedly criticised for eroding democratic norms by EU institutions and fellow member states).

The Netherlands has asked for rule of law conditions, and led a group of so-called frugal states including Austria, Denmark, Sweden and Finland to demand cuts to the recovery fund and rebates on their contributions to the EU budget.

How likely is a deal?

The talks were planned to last just two days but ran all night into their fourth day, making the summit one of the longest ever, but not yet as lengthy as the five-day EU Council in Nice in 2000.

The fact that the talks have not broken up and that leaders are still meeting reflects the widespread determination to find a deal, but reconciling the opposing views is difficult.

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