EU negotiators near deal to unlock €1.8T budget and rescue package

Budget talks with the European Parliament are entering their endgame.

EU negotiators near deal to unlock €1.8T budget and rescue package

Negotiators from the Council and European Parliament are closing in on agreements over the EU’s 2021-2027 spending and how to link EU funding to rule of law criteria, with deals expected as soon as this week.

With coronavirus cases surging across the Continent, EU institutions scaling back in-person meetings and national governments growing impatient to access crisis cash from Brussels, officials from the EU’s three institutions are under intense pressure to finalize the bloc’s €1.82 trillion budget-and-recovery package.

July’s deal among EU leaders shaped the major elements of the spending package but the Parliament said it wanted several concessions including more money and tighter rule-of-law criteria before it would give the necessary approval.

While potential hurdles still remain, a final compromise could see countries promise to free up a little more cash and tweak rule of law wording after EU leaders made clear they would not reopen any major elements of their historic summer deal.

“It looks like we’re going to get a deal [on the budget package] this week or next week, but more likely this week,” said German MEP Monika Hohlmeier, chair of the Parliament’s Budgetary Control Committee.

“It looks as if we are also potentially making progress on the rule of law mechanism,” she said, adding that “the chances that we could get there this week are great. To be honest, the pressure there is also quite high.”

This optimism is shared by other politicians and officials involved in the talks. “Negotiations are moving quickly [in] the right direction,” one person familiar with the talks said Wednesday. “We might really have an overall deal — perhaps not today, but tomorrow or on Friday.”

Negotiators met Wednesday evening to discuss the seven-year budget, the Multiannual Financial Framework, which requires Parliament’s consent to launch from January 1 as planned — and has become politically tied to the €750 billion recovery fund that would see countries take on significant joint debt for the first time.

However, that meeting ended shortly before 9:30 p.m. with no agreement. “Negotiations continue to be very difficult, substantial gaps remain. Talks continue on technical level,” tweeted German presidency spokesperson Sebastian Fischer.

The European Commission this week laid out eight options for boosting funding for MEPs’ favored budget programs in a technical paper to unblock talks, and that’s likely to form the basis of any final agreement.

One of the options would see countries agree to supplement budget programs annually using fines collected by the bloc (which usually lead to reductions in national governments’ EU budget contributions), as part of a formula that could also see countries putting up extra cash to compensate for money spent on recovery-related interest payments. Others include drawing on unused recovery grants for some budget programs.

The Commission’s suggestions fall short of the Parliament’s demand for €39 billion, including at least €9 billion in extra cash, to be allocated to programs in areas such as research, health and education. But they do provide a way for more money to be channeled to those programs, in line with the German presidency’s earlier demand for “creative ways” to find cash.

“If the Council moves on top-ups we can do it,” said one member of the European Parliament.

“The European Commission made [on Tuesday] very positive proposals in line with demands of the European Parliament,” said a second MEP. “If the Council accepts them then we can close the deal,” the MEP said, cautioning that so far the Council has not agreed with the proposals.

Negotiators have also made significant headway in talks over linking EU money to respect for the rule of law — held in parallel with the broader budget negotiations — with another round of discussions scheduled for Thursday and some officials indicating that a deal could be reached during that session.

“I can confirm that the latest round of negotiations took place in a positive and constructive atmosphere,” said a spokesperson for the German presidency. “A lot of ground was covered and a lot of progress was made by the negotiators. There is good will from all sides to come to an agreement swiftly.”

The Council and Parliament earlier this week moved forward on new wording that could see countries’ funding cut when a breach of rule of law principle is deemed to “affect or manifestly risk affecting in a sufficiently direct way” the sound financial management of the EU budget or the bloc’s financial interests, according to another person involved in the negotiations.

The regulation would include a list of examples of breaches, including the independence of the judiciary, according to this person, who said that the Commission’s new rule of law report — as well as a panel of independent experts — would be used in the decision-making.

However, there is still disagreement among rule-of-law negotiators on some details including a so-called emergency brake demanded by some capitals to allow for a discussion of measures at the European Council, and the way in which the mechanism would be triggered.

Many officials acknowledge the Parliament is unlikely to succeed with its demand to make it harder for countries to override a rule of law decision by the Commission.

But it still remains unclear whether Budapest and Warsaw — which previously indicated they would block the EU’s recovery fund if the rule of law mechanism was not concluded to their liking — will agree to the latest proposals.

If a deal between negotiators is reached on the long-term budget, it would still require a plenary vote in the European Parliament and then final approval from the Council.

Agreements on both the rule of law and long-term spending would open the way politically for the next ratification steps needed to begin borrowing money for the recovery fund.

However, officials already acknowledge the recovery fund will not formally become operational early next year as originally planned.

“It will not be possible anymore to have the recovery fund in place by 1st of January,” said one senior EU diplomat last week.

This story has been updated.

Source : Politico EU More   

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Discord over next global trade chief threatens to blow up WTO

The US doesn't support Nigeria's Ngozi Okonjo-Iweala.

Discord over next global trade chief threatens to blow up WTO

The next global trade chief was supposed to save the World Trade Organization.

Instead, the fractious race to appoint a WTO director general has itself now delivered a further blow to an organization on life support.

On Wednesday, the United States said it could not support Nigeria’s Ngozi Okonjo-Iweala as the next WTO boss even though most member countries supported her.

This was the last thing the WTO needed. In December last year, the organization’s top court for the settlement of global trade disputes effectively ceased to function because the United States was vetoing the appointment of judges. In Washington’s eyes, the WTO was going soft on China and U.S. officials demanded reforms.

The appointment of a new chief was meant to help resolve this rift and set the WTO back on track, but Wednesday’s political bombshell from the Americans now raises big challenges for the organization and its consensus-based approach to selecting a chief.

Okonjo-Iweala is a former World Bank No. 2 and twice acted as her country’s finance minister. She was presented as the consensus candidate to WTO members after a long process of consultations with all members in Geneva.

Washington, however, is throwing its weight behind her opponent, the South Korean candidate Yoo Myung-hee, saying that she has “25 years of trade experience and that she would be able to hit the ground running,” according to a WTO spokesperson.

The decision stunned many in Washington’s trade community, even after four years of the U.S. administration’s disruptive trade policies. 

“I have to say I’m surprised and disappointed in the U.S. reaction,” said Bill Reinsch, a senior trade adviser at the Center for Strategic and International Studies. “I had hoped [U.S. Trade Representative Robert] Lighthizer would have more respect for the institution than that.”

The organization had been counting on the next global trade chief to forge a solution to the crisis over the Appellate Body, the arbitration court that has fallen into limbo. The world trade group has largely failed to work out new rules since it began in 1995 as its decision-making ability depends on a consensus among 164 countries with very different economic interests. Revealingly, the WTO this summer even failed to agree on an interim chief.

So how does the WTO find its way out of the current crisis?

WTO officials will now hold consultations with member countries, hoping to find a consensus by the meeting of all delegations on November 9. By setting that date, the WTO is already blowing through the deadline it had originally set for the selection process.

If such a consensus cannot be reached, the WTO could theoretically shift to a vote, which would overrule Washington’s veto. At the meeting on Wednesday, no delegation suggested that. In WTO terms, this is a nuclear option which explodes its preference for negotiated settlement. An outvoted United States would also hardly be more likely to have a change of heart and unfreeze the impasse at the Appellate Body.

“The overwhelming preference of our members is to decide by consensus,” the WTO spokesperson said. “Consultations will be held between now and the 9th of November to try and achieve that consensus.”

According to the spokesperson, Okonjo-Iweala had the most preferences across regions by a wide margin, across both developed and developing countries. Many members, including the EU, had previously suggested that it was time for both the first African and the first woman to lead the organization.

“Regrettably, every decision before the WTO membership these days is not easy,” said Wendy Cutler, a former senior U.S. trade official who served in both Democratic and Republican administrations. “There were two well-qualified, impressive women for consideration and the WTO could not have gone wrong with either one.”

Overruling the U.S. by opting for a vote would also make it harder to get Washington on board for any reform plans Okonjo-Iweala might have. U.S. President Donald Trump is a fierce critic of the WTO and has previously threatened the pull the U.S. out. Former WTO Director-General Roberto Azevêdo even saw it as an accomplishment that the U.S. had not quit on his watch.

A possible way out of the impasse is a potential shift in the U.S. position if Democratic candidate Joe Biden wins the U.S. elections on November 3. But even if Biden wins, the new U.S. administration wouldn’t take office until January 20 next year.

Delaying the entire process until then might save the WTO in the longer term, but it’s unclear whether members will have the patience to wait for the the tectonic plates to shift in U.S. politics.

“That’s not good for the organization, but I’m not sure there’s an easier alternative,” Reinsch said. “Some people will want to vote, if only to spite the U.S., but most will want to preserve the consensus model as it protects them in the future. There could be a search for a third candidate.  I don’t think the U.S. can force the other 163 to give way.” 

Jakob Hanke Vela contributed reporting.

Source : Politico EU More   

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