Parliament wants funding and legal pledges in budget talks

The European Parliament wants to see a legally-binding commitment from member states on new EU levies and additional funding for key EU policies in the ongoing negotiations on the €1.8 trillion long-term budget and the recovery fund.

MEP Johan Van Overtveldt, the parliament's budget committee chair and chief negotiator, told EUobserver on Wednesday (9 September) that "what is now on the table is not acceptable for the parliament".

Talks between the council of member states and the parliament are at their early stages - but negotiations need to move quickly so that the €1.8 trillion combined budget and coronavirus recovery fund, agreed by EU leaders in July, can start pumping money into economies from next year.

MEPs will need to approve the 2021-2027 budget which is linked to the recovery fund.

"What is certainly still missing is the binding element, that the council takes up a binding commitment to produce efficient 'own resources' for what's next," the former Belgian finance minister said, using the EU-jargon for the new levies.

The new EU levies will help repay, from 2026 onwards, the debt taken on by the EU Commission to finance the landmark €750bn coronavirus recovery fund.

EU leaders agreed to a plastic tax at their summit in July, and signed off on a timeline for the commission to propose further 'own resources' such as a carbon border-tax, digital tax, financial transaction tax.

MEPs are worried, however, that if there is no legally-binding commitment on the levies, which have traditionally been disliked by some member state capitals, cuts from key programmes will instead be used to finance the repayment.

Van Overtveldt said "this is not some eccentric idea of the parliament, this is to make sure we don't get into a situation that nobody wants by 2026".

He quipped that the council "has made it a little bit too easy for themselves with what they have put on paper, because it could mean everything - but could also mean nothing".

Tough sell

However, a legally-binding commitment will be a tough sell to domestic capitals.

"It is difficult for the council to agree on that, as no-one has seen a legislative proposal on how these levies will work," said an EU source.

The commission is expected to start putting forward proposals next year.

The parliament also wants to see a "top-up" in key EU policies, such as the research program Horizon Europe or the student program Erasmus.

"The trajectory as outlined by the council decision cannot be reconciled with the ambitions of the council and the commission, in terms of climate, digitalisation, competitiveness, youth," Van Overtveldt warned.

€110bn to ask?

While Van Overtveldt did not want to go into numbers, one EU source estimated that those additional funds requested could amount to more than €110bn.

In July, EU leaders had some face-to-face rows over a relatively few billion, and so the room for manoeuvre to change the figures is very limited.

The parliament also wants to be part of managing the payments from the massive recovery fund.

"We think it cannot be the case that the parliament only has an ex-post role to play given the amounts involved," Van Overtveldt said, adding that the parliament is seeking a revision of several regulations concerning the financial frameworks.

Linking the respect for the rule of law to the disbursement of EU funds is one of the most delicate issues in the negotiations.

In July, EU leaders came up with a proposal that can be interpreted in several ways, and weakened the commission's earlier proposal on the issue.

A majority in the parliament wants to toughen up the tool again, but Hungary has already threatened to block the recovery fund, and essentially the budget, if the government in Budapest dislikes possible changes.

It makes the negotiations even more complicated that the actual rule of law legislation proposal is not part of the budget-recovery package, but it is politically-linked.

"It's up to the council to come up with a constructive proposal to deal with this issue," Van Overtveldt said, adding that the parliament "will keep bringing the issue to the table".

The council has been in informal talks to find a common position on the rule-of-law conditionality and revise the commission's original 2018 proposal on the matter, sources said.

Once there is a council position, it will be discussed with the parliament.

All sides are under time pressure as EU governments, especially in southern Europe, are waiting for the recovery fund to kick in to help offset the economic damage already done by the pandemic.

The council has set end of September as a deadline for agreeing with the parliament - which has said it would start drawing up contingency plans for the budget after the end of October.

"We don't want to hold back the corona fund because this is a very serious situation with an economic downturn that has been dramatic," the MEP said.

Van Overtveldt said the September deadline can be realistic if "council shows at least some respect for the requests of the parliament", and puts forward concrete proposals.

The next round of talks will be on Friday.