10 Dec 2020   |   News

EU leaders clinch €1.8T budget and COVID-19 stimulus deal

Fraught standoff with Poland and Hungary over release of EU money ends, clearing way for research and other investment funds to start flowing in 2021

Charles Michel

From left to right: Charles Michel, President of the European Council; Viktor Orban, Hungarian Prime Minister; Mateusz Morawiecki, Polish Prime Minister; Jeppe Tranholm-Mikkelsen, Secretary-General of the Council; Emmanuel Macron, President of France; Angela Merkel, German Federal Chancellor. Photo: Council of EU.

Updated Dec 11: After weeks of bad-tempered negotiations, EU leaders announced on Thursday evening a deal with Hungary and Poland that will unlock the bloc’s new €1.8 trillion budget and economic recovery fund. On Friday, leaders found agreement on funding allocations within the forthcoming Horizon Europe research programme. 

Hungary and Poland had been holding up the release of the giant pot of money because they opposed a mechanism tying the disbursement of funds to respecting the rule of law. Warsaw and Budapest are under EU investigation for undermining the independence of courts and media.

The breakthrough paves the way for new EU spending programmes covering science, education, climate change and digital projects to start flowing early next year. It also allowed member states and Parliament to settle funding amounts for the internal strands of Horizon Europe, due to start early next year. The European Research Council, the EU's top science funding agency, came out of these discussions well, gaining an extra 1 billion euros for its budget. 

European Council president Charles Michel announced the deal on the overall package, reached several hours into the two-day Brussels summit, via Twitter. “Now we can start with the implementation and build back our economies,” Michel said in a tweet. “Our landmark recovery package will drive forward our green & digital transitions.”

The deal allows Brussels to deploy €1.8 trillion in funding, including €1.1 for the EU’s normal seven-year budget and the rest for stimulus spending in economies cratered by the COVID-19 pandemic. It also brings the EU to a new fork in its history, with the bloc agreeing for the first time to issue joint debt to finance the recovery funding.

“Europe moves forward,” tweeted European Commission president Ursula von der Leyen.

With a settlement on the overall pot of money, officials could now finalise the internal ingredients of its 2021-2027 budget. Up for grabs was the final distribution of funding within the EU’s forthcoming €85 billion Horizon Europe research scheme, with scientists and officials in previous months duelling it out for resources for their preferred programmes. It will fall to Portugal, which takes over the presidency of the EU Council in January, to broker some of the final arrangements for the programme. 

Research has taken some heavy knocks during the intensive, year-long negotiation over the bloc’s future funding, with €13.5 billion diverted out of the Horizon Europe budget in July to other areas, such as cohesion funding and the COVID-19 recovery fund. In later negotiations, €4 billion was returned to the science scheme, though researchers have complained this boost doesn’t go far enough.

Blow to ‘oligarchs and corrupt politicians’

The compromise reached with Hungary and Poland will still tie the funding to respecting the rule-of-law, but now any country that disagrees with this mechanism will be able to challenge it in the European Court of Justice.

Members of the European Parliament, where there is strong support for checking Hungary and Poland’s democratic backsliding, said that the deal was a step forward.

Green leader Ska Keller called the agreement “a success in the defence of the rule of law and the start of Europe's recovery from the COVID-19 pandemic. EU funds must not be open to abuse by oligarchs and corrupt politicians. The last-minute agreement is a compromise that keeps the legal text on the rule of law mechanism unchanged and it must remain this way,” she said in a statement.

Keller added her “regrets” that the EU could have to wait a long time for any rulings from the EU’s highest court.

EU officials had threatened to go ahead and spend the money among 25 member states if Poland and Hungary didn’t drop their vetoes – a politically explosive option that many were keen to avoid.

Another scenario would have seen Brussels forced to finance itself through a provisional and much reduced budget in 2021 that would halt spending on new projects like Horizon Europe.

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