Deal: European Council reaches agreement on post-pandemic economic recovery
Today 21 July 2020, at 05.30 Brussels time, European Council President Charles Michel announced that EU leaders have reached an agreement on the two crucial tools for post-pandemic economic recovery in the EU, namely (i) the Recovery Fund ‘Next Generation EU’ and (ii) the updated proposal for the next long-term EU budget.
Under the agreement, which needs now to be endorsed by the European Parliament, the Commission will be authorised to borrow up to 750 billion euros for Next Generation EU on the financial markets, to be repaid by 2058. These funds will be used for back-to-back loans and for expenditure channelled through the MFF programmes. The final figures of the Recovery Fund amount to 750 billion euros, of which 390 billion will be distributed in the form of grants to Member States and 360 billion euros in loans (by comparison to the Commission’s proposal, which included 500 billion euros in grants and 250 billion euros in loans, as suggested by the mid-May Franco-German proposal).
Member States will have to prepare their national recovery and resilience plans for 2021-2023 in accordance with the country-specific recommendations and with the objectives of the EU’s green and digital transitions. These plans are to be approved by the Council by a qualified majority vote on a proposal by the Commission. The disbursement of grants will take place only if the agreed milestones and targets set out in the recovery and resilience plans are fulfilled.
The agreement for the 2021-2027 MFF comprises an overall amount for commitments of 1,074.3 billion euros (whereas the Commission had proposed an amount of 1,100 billion euros). It includes a deal to introduce a new own resource based on non-recycled plastic waste, which is to be introduced and to apply as of 1 January 2021. As a basis for additional own resources, the Commission will put forward in the first semester of 2021 proposals on a carbon border adjustment mechanism and on a digital levy, with a view to their introduction at the latest by 1 January 2023. In the same spirit, the Commission will put forward a proposal on a revised European Trading System (ETS) scheme, possibly extending it to aviation and maritime. Moreover, it was agreed to work towards the introduction of other own resources, which may include a Financial Transaction Tax.
For the period 2021-2027, lump-sum corrections will reduce the annual GNI-based contribution of Denmark, Germany, the Netherlands, Austria and Sweden. These Member States will benefit from a gross reduction in their annual GNI-based contribution. These gross reductions shall be financed by all Member States according to their GNI.
For more detailed information, read the European Council Conclusions, available here.