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European Council finally agrees €750 billion virus recovery fund - including €390 billion in grants

“It is true that we will pay in more than we receive, but that does reflect our strong economic growth,” Europe Minister Thomas Byrne said.

European Commission President Ursula von der Leyen, and European Council President Charles Michel.
European Commission President Ursula von der Leyen, and European Council President Charles Michel.

Updated Jul 21st 2020, 8:44 AM

EU LEADERS HAVE emerged from a marathon four-day and four-night summit with what they boasted was a historic rescue plan for economies left shattered by the coronavirus epidemic.

The €750 billion deal was sealed after intense negotiation that saw a threats of a French walkout and a Hungarian veto – and fierce opposition from the Netherlands and Austria to too generous a package.

“These were of course, difficult negotiations in very difficult times for all Europeans,” EU Council Chief Charles Michel, whose job was to guide the tortuous talks over more than 90 hours.

He dubbed the summit “a marathon which ended in success for all 27 member states, but especially for the people.”

The package, seen by AFP, was made possible by the crucial backing of Germany and France and includes the biggest ever joint borrowing by the 27 members of the bloc, something that had been resisted by Berlin and the so-called “frugal” northern states for generations.

The €750 billion recovery fund comprises of €390 billion in grants and €360 billion in loans to countries hit by the pandemic.

The Irish team

belgium-europe-summit Taoiseach Micheál Martin with von der Leyen, Michel, and other EU heads' of state. Source: FRANCOIS WALSCHAERTS

Taoiseach Micheál Martin said he welcomed the “substantial and significant” package of measures, which he said would “go a long way to help reboot and re-energise economic recovery within the European Union”.

It has been a very challenging number of days negotiating this package, but it has been worthwhile.

The solidarity displayed throughout this summit is something that I think will stand Europe to good stead in the future.

Martin said that “from an Irish perspective, he was satisfied that there was funding there to protect the Common Agricultural Policy, which will support Irish farmers in producing food.

He also welcomed the special Brexit reserve fund of €5 billion, which will distribute funds to countries hardest hit by Brexit; as well as an increase in the Horizon fund, which he said was “important for research and development”.

“Overall this is a strong package and, from the Irish and European perspective, we welcome its wide-ranging and comprehensive breadth, which I think will do a lot to help Europe respond to the challenges of Covid 19,” Martin said.

Source: TheJournal.ie/YouTube

In an interview on RTÉ’s Morning Ireland today, Minister of State for European Affairs Thomas Byrne was asked whether the deal was worth Ireland’s while, as it would end up being a net contributor rather than net beneficiary from this fund.

It is true that we will pay in more than we receive, but that does reflect our strong economic growth, and the Single Market participation. That’s a huge benefit to the economy, for social, environmental, financial terms it’s been absolutely massive.

Covid-19 recovery funds are needed now, and can be paid back over the next 30 years, Byrne said.

It is difficult to estimate how much we will contribute, but it will be substantial but we will be gaining and back from the EU budget itself in terms of direct grants, in terms of loans.

“But also particularly,” Byrne added, “in the benefits to our businesses and to our jobs and making sure that all of Europe is working together and the economy can be rebooted.”

Byrne also said that support for CAP was worth €300 million; when asked how much of the €5 billion Brexit fund Ireland would get, Byrne said that that would be an issue that would be decided later, but that as it was for “countries and sectors disproportionately affected by Brexit, Ireland is going to be top of that list”.

The €750 billion virus recovery deal is a special victory for French President Emmanuel Macron, who came to office in 2017 committed to strengthen the European Union, but had struggled to deliver against member states with less ambition for the seven-decade-old EU project.

“This is a historic change for Europe,” Macron told reporters in a joint press conference with German Chancellor Angela Merkel, speaking of her relief that Europe had, in her eyes, shown itself equal to “The greatest crisis in the history of the European Union.”

The European Council, or the gathering of all 27 members of the European Union, agreed to the deal; it now is to go to the European Parliament for final approval.

Tweet by @Ursula von der Leyen Source: Ursula von der Leyen/Twitter

‘Frugals’ fight

The package will send tens of billions of euros to countries hardest hit by the virus, most notably heavily indebted Spain and Italy that had lobbied hard for a major gesture from their EU partners.

Their call for solidarity was met with the fierce opposition of the “Frugals”, a group of small, northern nations led by Netherlands, who believed strongly that the stimulus package was unnecessary.

Spanish Prime Minister Pedro Sanchez hailed “a Marshall Plan for Europe”, that would boost Spain’s suffering economy by €140 billion over the next six years.

But Prime Minister Mark Rutte of the Netherlands denied that the advent of joint borrowing for the rescue heralded the start of what he had warned of before the talks – a “transfer union” with a permanent north south transfer of wealth.

“This is a one off, there is a clear necessity for this given the excessive situation,” he told reporters.

The frugals were also deeply apprehensive of sending money to southern countries that they see as too lax with public spending.

To meet their concerns, payouts from the package will come with important strings attached – a hard pill to swallow for Rome and Madrid who deeply resisted anything resembling the harsh bailouts imposed here in Ireland, or in Greece or Portugal during the debt crisis.

The frugals were also enticed with heavy rebates on their EU contributions, furthering a practice first offered to Britain decades ago, when it was still a member.

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belgium-europe-summit Dutch Prime Minister Mark Rutte, Finland's Prime Minister Sanna Marin and European Council President Charles Michel. Source: AP/PA Images

‘Rule of Law’

The recovery package will complement the unprecedented monetary stimulus at the European Central Bank, that has largely succeeded in reassuring the financial markets despite a catastrophic recession in Europe.

Overall, the deal will dole out €390 billion in the form of grants to pandemic-hit countries.

That was lower than an original €500 billion proposal made by France and Germany. Another €360 billion was to be disbursed in loans, repayable by the member state.

The stimulus payments will not be blank cheques to member states.

Spending will be closely controlled and must be devoted to policies seen as compatible with European priorities, including politically difficult economic reforms as well as the environment.

belgium-europe-summit German Chancellor Angela Merkel, right, speaks with French President Emmanuel Macron and European Council President Charles Michel. Source: AP/PA Images

The European Commission, the EU’s executive arm, will be in charge of distributing the funds, with the 27 member states able to turn down a spending plan if a weighted majority of them decide to intervene.

The rescue package was agreed along with the EU’s long-term budget, bringing the agreed spending to €1.8 trillion through 2027.

The plan was nearly upended by Hungary and Poland due to a demand that EU payouts be tied to the “Rule of Law”, Brussels jargon for upholding laws on freedom of speech and an independent judiciary.

Budapest and Warsaw are under fire for offending EU norms, but a proposal to tie the EU budget to those concerns was watered down to the satisfaction of Hungarian Prime Minister Viktor Orban and his Polish counterpart.

The package now requires more technical negotiations among member states as well as a ratification by the European Parliament that could happen as soon as Thursday.

© – AFP 2020 

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