EU negotiators strike deal on recovery fund

The German presidency of the Council of the European Union reached a deal on Tuesday with European Parliament negotiators on an EU recovery package of 1.8 trillion euros ($2.1 trillion), helping the bloc to weather the COVID-19 pandemic.

The agreement, reached after 10 weeks of haggling, needs to be endorsed by the European Parliament and the 27 member states of the European Council. Germany holds the presidency of the council for the second half of 2020.

"Negotiations with the Parliament took time, but we have finally made it. We have reached a political agreement on the last details of the EU's next long-term budget," said Michael Clauss, permanent representative of Germany to the EU. "This is a well-balanced deal, which addresses the issues raised by the Parliament while respecting the guidance received from the European Council in July."

The European Council, which includes heads of state or government of member states, is the EU institution that defines the general direction and priorities of the EU. A separate body, the Council of the EU represents member states' governments and is where ministers from EU countries meet to adopt laws and coordinate policies.

Clauss said Europe has been hit severely by the second wave of the coronavirus pandemic.

"We urgently need the recovery fund up and running in order to cushion the dire economic consequences of the pandemic," he said.

The 1.82-trillion-euro recovery package negotiated by EU leaders in July includes a 1.07-trillion-euro EU budget for 2021-27, also known as the multiannual financial framework and a 750-billion-euro temporary recovery fund, known as Next Generation EU.

The European Parliament claimed that in the compromise deal, it obtained 1.6 billion euros on top of the package agreed by the heads of state or government at their July summit. It includes 1.5 billion euros to reinforce flagship programs to protect citizens from the pandemic, provide opportunities to the next generation, and preserve European values, and 1 billion euros to increase flexibility to address future needs and crises.

"The conclusion of these negotiations means the European recovery plan can finally be activated. This fund is very important to get through the crisis, but it stands or falls with its use," Johan Van Overtveldt, chairman of the Parliament's Committee on Budgets, said in a statement.

Setting priorities

"The resources need to get to where they are actually needed. Here, too, the European Union must prove its credibility."

Jean Pisani-Ferry, a senior fellow at Bruegel, a Brussels-based think tank, said the EU plan needs more clarity on economic aims, its priorities and the content of the contractual arrangements it would entail between EU and member countries.

"It should acknowledge and emphasize that the main goal of the RRF(Recovery and Resilience Facility) is not to contribute to immediate relief or a Keynesian stimulus, but to foster structural transformation, especially in less-advanced and harder-hit member states," he wrote on Bruegel's website.

Europe is the new epicenter of the COVID-19 pandemic. The European Autumn Economic Forecast released last week marked down the region's economic growth for next year. It predicts growth of 4.2 percent in 2021 for the 19-member eurozone, down from the 6.1 percent projected in the summer forecast in early July. For 2020, it expects the economy to shrink by 7.8 percent, better than the 8.7 percent contraction in the summer forecast.

European Commission President Ursula von der Leyen said on Tuesday that she welcomes the agreement. "We now need to move forward with finalizing the agreement on the next long-term budget and Next Generation EU by the end of the year," she said in a statement.