To break the deadlock, the Twenty-Seven reduce the sail of the recovery plan

Second day of discussions for the 27 who have met since Friday July 17 in Brussels to try to agree on the European recovery plan at 750 billion euros and the EU budget for the period 2021- 2027 of some 1,100 billion. After a tense dinner, and an early morning meeting between several leaders in Washington format - France, Germany, Netherlands, Italy, Spain -, the President of the European Council, Charles Michel, drew up a revised "negotiation box" . With the objective of starting off on the right foot the discussions that had gotten bogged down the day before. And especially to bring to better feelings, Mark Rutte who, as expected, turns out to be the toughest partner in these discussions.

Read also: Recovery plan: Rutte is inflexible against the Twenty-Seven

He has won in several areas that he considers essential. Concerning the strict governance of the subsidies granted to the Member States to restart their savings - Italy and Spain in the lead - a right of scrutiny mechanism is created. It would allow " at least one State " having reservations about the reform plan presented by another to open " within three days " a debate at 27, either before the European Council or before the Ecofin, which brings together the EU finance ministers. Of course, the angry words - unanimity or the right of veto - are not written black on white in Charles Michel's proposal, but the wording is sufficiently ambiguous to satisfy the Dutch Prime Minister, who wants to control the proper use of funds leaves to block their disbursements and not to fully target the countries of the South, who fear the intrusion of the countries of the North in their national choices. In short, we are just putting the problem around these questions until later.

A reduced grant envelope

Another concession made to Rutte and to the leaders of the club of frugal countries - Austria, Sweden, Denmark and Finland -, of which the Dutch Prime Minister is the leader, the envelope of the subsidies is reduced. It is brought down to 450 billion euros, instead of the 500 billion proposed by Germany and France on May 18. And since there is no question of letting it be said that the Twenty-Seven are downgrading solidarity towards the countries most affected by the coronavirus crisis (Italy and Spain in the lead), the envelope of subsidies intended to go directly to support the recovery plans implemented by the Member States takes a little volume, going from 310 billion to 325 billion euros. In return, certain programs in the European budget which were to be supplemented with the recovery plan or created on this occasion fall or are ... buried before they have even been launched.

This is particularly the case of the solvency instrument intended to come to the aid of companies in difficulty which was to be endowed with 26 billion euros and is now wiped out. While a second wave of contamination threatens Europe, the Health program is reduced to 5 billion, losing 2.7 billion, or more than a third of the credits. Curious message. In contrast, the volume of loans increased by 50 billion euros - to 300 billion euros -, allowing at this stage to preserve the 750 billion of the stimulus plan. It is not a feat. In this grand dupe game, everyone knows very well that loans are only incidental and that the sums borrowed by the Commission on the markets will relate above all to these subsidies. Moreover, no country, at this stage, has come to dip into the 240 billion euros of the European Stability Mechanism, also made available in June. Only grants count.

A bigger discount for the frugal

Finally, the Dutch, like all frugals, are also seeing their reduction in the European budget increase even as the United Kingdom has left the EU. The volume of discounts offered by Charles Michel is far from anecdotal. If his proposal were selected, it would represent some 46 billion euros to be funded by other member states, including France.

These proposals were welcomed by Mark Rutte. " The proposals on governance presented by Michel are a serious step in the right direction, " said a diplomat adding, however, that " many problems remain ". The frugals, who will have to go to the cashier to repay part of these loans, hope to continue to push their advantage in this difficult balance of power from which they are already winning. They thus wish to further reduce the volume of the recovery plan. " It is rather a request from Finland, Sweden and Denmark, which, moreover, left Rutte to go it alone on the governance of funds and the right of veto, " confides a diplomat. Germany, which wants a quick deal on the stimulus package so as not to overwhelm its presidency of the EU, would be ready to further reduce the volume of subsidies to 400 billion euros. Because it has little other option than to unite with its partner around this “historic” recovery plan, France will be forced when the time comes to do so. The Twenty-Seven should therefore continue to reduce the sail of the recovery plan, making sure to maintain or inflate this windfall of 325 billion euros which will go directly to the financing of national recovery plans.

If they want to reach an agreement during this summit and not have to return to Brussels next week, the 27 will also have to solve other major difficulties in the coming hours, on the conditionalities to the state of law and of the climate in particular. " Charles Michel has always thought that the rule of law could be a mine once the other problems have been resolved, " says a European official. The countries of Visegrad - Hungary in the lead - would then take over from the frugals in order to snatch, in their turn, a few billion more from this great bargain and game of huckster that are the negotiations around the recovery plan and the European budget.