The European Union is facing huge uncertainties. The Covid-19 health crisis is far from over with countries struggling to prevent or halt a second wave, and their economies digesting the worst recession since the Great Depression. At the same time, the global climate emergency is intensifying and leading to further social inequalities. The EU and its member states are clearly struggling to balance policies to stop the economic fall-out of Covid with the priorities of the green and digital transitions promised by the von der Leyen Commission.

On 21 July, EU leaders agreed on a budget of €1.8 trillion to support the priorities of the Union for the climate and digital transitions and to respond to the economic fall-out of the Covid-19 crisis. The package comprises 1.074 billion euros for the so-called Multiannual Financial Framework (MFF – the budget for the EU for the next seven years) and an ad hoc EU Recovery Instrument (called Next Generation EU) worth 750 billion euros (360 billion in loans and 390 billion in grants).

A good summary of the details of the budget agreement can be found in Politico’s ‘guide to the EU budget deal’. The Financial Times has conducted an excellent analysis of the Next Generation recovery tool.

The political deal in the Council received mixed reactions. Some EU leaders hailed it as ‘historical’, calling it even the EU’s ‘Hamilton moment’, referring to the 1790 compromise when the U.S. federal government took over the debts of the various U.S. states after the War of Independence. For a critique of this Hamilton hyperbole, read Sony Kapoor’s analysis.

The European Parliament which must formally approve the seven-year budget (not the Next Generation budget) was less impressed. It adopted a resolution calling for the involvement of the MEPs in the Next Generation budget and disapproved of several cuts made to programmes for climate protection, digital transition, health, youth, culture, research or border management. Trilateral negotiations between Parliament, Council and Commission, will have to find a balanced compromise on the budget and the EU’s own resources system.

One of the most disappointing cuts by the Council was the downgrading of the proposed 40 billion Just Transition Fund to 17,5 billion euros. The Just Transition Fund is the main tool to support regions and workers affected by the transition to a zero-carbon economy. The Council declared that countries must commit to the EU's goal to become "climate neutral" by 2050, in order to draw from this fund.

On the other hand, EU leaders earmarked that one-third of the long-term budget and the Next Generation EU money for climate-related investments. This comes down to 547 billion euros to be made available for the Green Transition between 2021 and 2027. But the Institute for European Environmental Policy (IEEP) pointed out in a recent study that climate monitoring in the EU budget needs to be overhauled to make sure that the investments do not go to fossil fuels.

In a first reaction to the Council compromise, the ETUC welcomed the budget deal as “good news for the 60 million people across the EU who depend on rapid investment to save their jobs or avoid long-term unemployment”. The ETUC, however, criticised the reduction of the number of grants in the Recovery Fund, the drastic cut to the Just Transition Fund and to health measures.

Photo Credit: EC

Bron: https://www.etui.org/news/eu-budget-deal-tension-between-covid-recovery-and-green-deal