For months, the €64.5 billion had been the subject of fierce bargaining between member states, but now leaders reached an agreement, according to Euronews.
Public coffers have been depleted by economic turmoil caused by the pandemic, the Ukraine issue, the energy crisis, record inflation and devastating natural disasters, leaving the budget without the financial flexibility to respond to unforeseen events.
The bloc’s 2021-2027 budget of €2,018 billion at current prices (including €806.9 billion for the COVID-19 recovery fund) will receive an additional €64.6 billion by the end of the period. The political deal is well short of the Commission’s originally planned allocation of €98.8 billion.
Nevertheless, the draft budget of €98.8 billion met strong opposition from member states, which would have had to provide more than €65 billion in entirely new contributions.
The budget replenishment includes new items to be noted.
Firstly, the European Union seeks and intends to become a leading player in the fierce race for new technologies, so the Commission, under the leadership of Ursula von der Leyen, developed the Strategic Technologies for Europe Platform (STEP) to fund vanguard projects and promote high technologies produced in the EU. STEP was designed to help all member states, from the richest to the poorest, access much-needed liquidity on a level playing field.
Von der Leyen initially asked for €10 billion for STEP, but leaders rejected the idea and allocated only a small portion: €1.5 billion to support the European Defence Fund (EDF).
Secondly, there is a special expenditure of €3.5 billion for unforeseen crises. In its original proposal, the Commission requested €2.5 billion to replenish the Solidarity and Emergency Reserve, which is activated in case of major natural disasters, and €3 billion for the Flexibility Instrument, which, as its name suggests, can be used to respond to any critical situation.
The agreement allocates €1.5 billion for emergency aid and €2 billion for the Flexibility Instrument.
Thirdly, as a result of the crises that the EU had to endure, a green light had to be given to joint borrowing, especially for the creation of the COVID-19 recovery fund. Thus, the €800 billion Plan (until 2026) involves significant interest payments, which rose sharply when inflation reached double digits and the European Central Bank responded with successive rate hikes.
The Commission asked member states to add €18.9 billion to the budget revision, an amount that immediately caused consternation. Leaders eventually settled on a three-stage “cascade mechanism.” First, the money would come from existing recovery fund reserves. If there is a shortfall, Brussels will take money from programmes that are failing and from the Instrument for Flexibility. If even this proves insufficient, a third phase will begin and an instrument will be created funded by “de-commitments,” financial packages that have not been spent or cancelled.
Fourthly, there is the redeployment, which includes €10.6 billion. The total of all the above figures comes to €64.6 billion, but there is a catch: countries will only pay €21 billion.
It turns out that in addition to €33bn in loans from Ukraine, which involves the Commission and Kyiv, member states have decided to transfer €10.6bn from current EU initiatives: €4.6 billion from Global Europe, €2.1bn from Horizon Europe, €1.3 billion from aid for displaced workers, €1.1 billion from agriculture and cohesion funds, €1 billion from EU4Health and €0.6 from the special reserve for Brexit mitigation.
Speaking on condition of anonymity, a senior Commission official said the overnight cuts to Horizon Europe, the bloc’s flagship research programme, and EU4Health were unfortunate and “difficult to swallow.”
Two items now remain virtually unaffected. First is the increase in aid to Ukraine. This was the only item that the leaders left untouched.
The EU will create a Fund for Ukraine that will provide the war-torn country with €50 billion between 2024 and 2027 to support its economy, including the provision of basic services such as health, education and social protection. The fund will consist of €17 billion in non-repayable grants and €33 billion in low-interest loans, meaning member states will only subsidise the former. The money for the loans will be borrowed by the Commission on the markets and then repaid by Ukraine.
In return, Kyiv is expected to implement structural reforms and investments to improve public administration, good governance, the rule of law and the fight against corruption. Consequently, all of this could help the country advance its EU accession bid.
The second item is related to migration management, which includes €9.6 billion. This too was left largely untouched, as migration management is a key priority shared by all countries, especially those in Southern Europe, which bear the brunt of irregular arrivals.
The Commission asked for €12.5 billion to cover the costs of border control, relations with the Western Balkans and hosting millions of Syrian refugees in Turkey, Syria, Jordan and Lebanon. Leaders largely agreed and allocated €9.6 billion.
The negotiations for €64.5 billion in additional funds began in June, shortly after the European Commission submitted its proposal, and culminated in an emergency summit on 1 February, at which Viktor Orbán lifted his month-long veto.
We had certainly some difficult choices to make, but we had a very good result, Ursula von der Leyen said after the meeting.
