Convergence, Resilience and Transformation: The drivers behind the newly revised MFF and recovery package for the EU

President of the European Council Charles Michel announced his revised proposal for the EU’s long-term budget and recovery plan today, after the Commission’s proposal was opposed by Member State leaders on June 19.  This comes one week before the special European Council meeting with the 27 Member States leaders who will meet physically in Brussels on July 17 and 18 for the first time since the outbreak of the COVID-19 pandemic.

After discussions and bilateral meetings with all Member States and the European Parliament, President Michel formulated a revised proposal for the European Multi-annual budget 2021-2027 and the recovery plan.

The proposal is based upon the EU’s objectives for the coming years:

  1. Climate Transformation
  2. The Digital Agenda
  3. European Values
  4. A Stronger Europe in the World
  5. With regards to the recovery strategy for the COVID-19 pandemic, Michel stated that the goal is to be able to repair the damage caused by the COVID-19 crisis, reform the Member States’ economies and simultaneously spearhead the remodeling of the EU’s society.

The six ‘building blocks’ of the proposal which could lead to a possible future agreement on the EU’s long-term budget and recovery plan are the following:

  1. The size of the MFF:  the proposed size of the MFF is that of €1,074bn
  2. The rebates:  these will be maintained for Denmark, Germany, the Netherlands, Austria, Sweden
  3. The size of the recovery package:  the Commission will be empowered to borrow up to €750bn through an own resource decision.  These funds may be used for back-to-back loans and for expenditure channeled through MFF programmes
  4. Loans and grants:  a balance between loans, guarantees and grants is being proposed to avoid over-burdening Member States with a higher level of debt
  5. The allocation of recovery and resilience facility: this building block establishes a real-link between the recovery plan and the crisis and ensures that the money will go to the regions and sectors most effected by the crisis.
  6. Governance and conditionality:  this proposal includes three important goals
    1. the formation of resilience national plans
    2. targeting 30% of funding on climate change projects
    3. the rule of law and European values- proposing a strong link between funding and the rule of law and governance

On the issues of repayments and own resource, Michel proposed that repayments would start earlier in 2026 (2 years ahead) and this would put the pressure on the Council to introduce a system of own-resources.  On the latter, Michel proposed a particular focus on three areas: plastic waste, carbon adjustment mechanism and a digital levy.

On the challenge of Brexit, Michel is proposing a Brexit reserve of €5bn in order to counter unforeseen consequences in the most effected Member States and sectors.

Finally, learning from the COVID-19 crisis, Michel is proposing an increased focus on the health sector in the EU.

More details can be found here.

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