EU’s Michel tries to bring ‘frugals’ on board with Covid recovery scheme

European Council President Charles Michel is due to propose a smaller 2021-27 EU budget than previously envisaged, officials said on Friday, in a bid to make the bloc’s mass economic stimulus more palatable to thrifty northern member-states.

With the EU economy headed for its worst recession, the bloc is haggling over how to finance recovery from the coronavirus pandemic with the frugal, wealthy north facing off against the high-debt southern countries hit harder by Covid-19.

Under discussion is the bloc’s next budget, so far envisaged at 1.1 trillion euros, and an attached 750-billion-euro recovery fund. The ‘frugals’ want a smaller budget and economic reforms as a condition for accessing the extra funds.

The 27 national EU leaders are due to meet in Brussels next week for their first face-to-face talks since coronavirus drove Europe into lockdown in March to bargain over the proposal.

Their chairman, Michel, is due at 0900 GMT on Friday to lay out his compromise plan. Two officials familiar with the proposal said he would lower the size of the budget to try and bring the ‘frugals’ on board.

The Covid-19 pandemic is the latest big challenge for the 27-nation EU after it struggled with a debt crisis a decade ago, a migration crisis and then the trauma of Brexit. Some leaders have even framed it as existential for the bloc, saying the EU cannot be seen to fail this time as euroskeptic feeling mounts in countries like Italy.

The proposal for the seven-year budget that Michel presents is known in Brussels jargon as the “negotiating box,” a complex set of numbers covering spending on areas from support for agriculture to regional development, research and scholarships.

This is the starting point for negotiations the EU leaders face when they meet on July 17-18.

EU summits that involve money are always the most fraught, and sometimes haggling goes into an extra day or two, which is why leaders often pack for “a four shirter” trip to Brussels.

Although setting the budget – called the multiannual financial framework (MFF) – is an arcane process, the stakes are high because such huge sums are involved.

This time, the negotiations are even more critical and complicated because leaders will also try to agree on the recovery fund, and the two packages are now interlocked as member states look for bargaining chips. [Reuters]