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Wednesday, July 22, 2020

Budget and recovery package: Finally an agreement between the 27 member States!

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After long and difficult negotiations, the 27 Member States reached an agreement on a comprehensive package of 1,824.3 billion euros which combines the multiannual financial framework (MFF) and an extraordinary recovery effort under the Next Generation EU (NGEU) instrument.

Alone, the MFF represents 1 074.3 billion euros that are dedicated to the fulfillment of EU long term objectives: 

- Single market, innovation and digital
- Cohesion, resilience and values
- Natural resources and the environment
- Migration and border management
- Security and defence Neighbourhood and international policy
- European public administration

This budget is the result of two years of negotiation between the Member States. However, it was not the main subject of disagreement. Indeed, the Recovery fund, called Next Generation EU, crystallized the tensions in the European community. Under the Next Generation EU instrument the Commission will be able to borrow up to 750 billion euros in the markets to address the challenges posed by the COVID-19pandemic. 

Among these 750 billion euros, 390 billion euros will be distributed in the form of grants to member States, and 360 billion euros in the form of loans. Compared to the initial project proposed by France and Germany, the proportion of grants has been significantly reduced, from 500 billion euros to 390 billion euros. 70% of the grants from the Recovery and Resilience Facility will be committed in 2021 and 2022. They will be granted according to the Commission’s criteria, considering:  member States' living standards, size and unemployment levels. 30% will be committed in 2023, with the unemployment criterion being replaced by the GDP’s drop in 2020 and 2021.  

Finally, the rule of Law and the protection of the environment are now key principles in determining the allocation of this budget. 
Indeed, 30% of the total expenditure from the MFF and Next Generation EU will target climate-related projects.            

The European Council also underlines the importance of the Rule of law in the EU. Therefore, the EU implements a conditionality principle of respect of the Rule of law for the procurement of EU grants and loans. 

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