EU summit deal: what has been agreed and why was it so difficult? | World news

EU summit deal: what has been agreed and why was it so difficult? | World news

What has been agreed?

After four days and nights of hard-fought negotiations, EU leaders have agreed a €1.8tn (£1.6tn) financial package, comprising a €750bn recovery plan intended to haul the bloc out of the worst recession in its history, as well as a €1.074tn budget for 2021-7.

What is new about the deal?

To fund the €750bn coronavirus recovery plan, the European commission will borrow on financial markets on an unprecedented scale, a step towards deeper integration hailed as historic. To repay investors, EU member states have agreed to create new common taxes, including a plastics levy that will be introduced in 2021. The commission, which drafts EU law, has been asked to propose a levy on polluting imports from non-EU countries, as well as a digital tax. But agreeing these taxes will not be easy, so there is no certainty about how the EU will repay its debts.

Why was there so much rancour?

The EU has a long tradition of arguing over money at late-night summits, but the latest European council– the longest in nearly 20 years – was especially bitter because it triggered deep conflicts on economic and political values.

Some northern European countries have long accused southern Europe of failing to carry out necessary reforms to protect their economies from a crisis.

Italy and Spain, among the hardest hit by coronavirus, accused those northerners of putting in jeopardy the EU project by failing to show solidarity in a pandemic not of their making.

Western Europe is worried about what leaders there see as sliding democratic standards in Hungary and Poland, as those governments take steps to restrict judicial independence. The EU’s “old” member states argue no country should get EU funds without respecting basic democratic values. Hungary and Poland say they have done nothing wrong, accusing the westerners of being arbitrary.

What were the sticking points?

The biggest stumbling block was the amount of grants (fiscal transfers) for countries hardest hit by coronavirus. France and Germany had proposed €500bn in grants, but a group of four “frugal” north European countries went into the talks insisting only loans should finance the coronavirus recovery. The final compromise settled on €360bn loans and €390bn grants.

Leaders also clashed over control over the funds, eventually agreeing an emergency brake that allows one government to make a warning at an EU summit, if they deem a recipient of recovery funds is failing to enact promised reforms.

Who are the winners and losers?

Everyone had to give ground. France, Germany, Spain and Italy must accept less generous recovery grants than they had wanted. The frugal club (Austria, Denmark, the Netherlands and Sweden) made a major concession by agreeing grants at all.

To grease the wheels of compromise, the “frugals” all secured increases in their EU budget rebates, meaning a bigger discount on their contributions to the EU budget.

Hungary and Poland arguably emerge as the biggest winners. These governments, which are both being investigated by the EU for undermining independent judiciary, successfully fought linking EU funds to the rule of law. EU leaders agreed that a proposal will be made another day.

Is this the green recovery promised?

Nearly one third (30%) of the budget and recovery plan will be targeted towards the EU goal of reducing carbon emissions to net zero by 2050. Environmental campaigners have previously complained of a lack of detail, claiming that polluting industries, such as aviation, will still have access to stimulus funds

In a partial victory, Poland will still be able to access half the money available in a green transition fund without signing the EU pledge of net-zero emissions by 2050.

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