Next Generation EU: Ambitious recovery plan with some question marks

Next Generation EU: Ambitious recovery plan with some question marks
Vice-President Margaritis Schinas and Commissioner Stella Kyriakides presenting the new Health Programme at a virtual press conference, credit: EU 2020

The European Commission announced last week its proposal for a recovery of EU’s economy. The proposal, called Next Generation EU, is a temporary reinforcement of EU’s long-term budget for 2021 – 2027.

The funding raised for Next Generation EU, in total €750 billion, will be invested across three pillars.

The first pillar is intended for support to member states for investments and reforms and is dominated by a new recovery and resilience facility of €560 billion which be allocated to member states in the form loans and grants (45 %/55%). The Commission will use its good rating on the capital market to borrow the money on favourable conditions.

Who will pay the interest?

The idea is to postpone the reimbursement of the loan until 2028 and only pay the interest on the loan during 2021 – 2027 or next multiannual financial framework (MFF). The maturity date will be extended as much as possible or to a maximum of 30 years. The sticking point is the ratio between loans and grants. The Commission says that it has taken stock of the needs in the member states.

European Commission president Ursula von der Leyen admitted when presenting the proposal that the exact ratio between loans and grants will have to be discussed with the member states, some of which (the so-called Frugal Four) are hesitant to borrowing on the capital market and becoming liable for common debt.

The payment of the interest will be covered by raising the ceiling of EU’s budget and creating new revenues from EU’s own resources. The ceiling of own resources will increase by 0.6 percentage points from 1.4 % to 2 % of EU’s gross national income (GNI). According to von der Leyen, this is perfectly in line with the current legal set-up and has been done in the past.

This will lead to minor increases in the contributions from the member states to the EU budget but not affect their national debts. A spokesperson of the Commission confirmed to The Brussels Times that the loans and the interests on them will be repaid by the borrowing member states.

Speed is of the essence in the decision-making process but it will take the rest of 2020 to put the recovery and resilience facility in place. The facility will have to be agreed in the European Council, the revised MFF then adopted by the European Parliament and finally the whole package ratified by the national parliaments in line with their constitutional requirements.

The second pillar in the Commission’s recovery plan is intended for support to private companies. Its main instrument is a new Solvency Support Instrument. It can be operational already this year and will have a budget of €31 billion, aiming to unlock €300 billion in solvency support for companies and prepare them for a cleaner, digital and resilient future.

Will meat production be reduced?

A component in the first pillar is a €15 billion reinforcement for the European Agricultural Fund for Rural Development. The purpose is to support rural areas in making the structural changes necessary in line with the European Green Deal and achieving the targets of the new biodiversity and Farm to Fork strategies.

When he presented the two strategies (20 May), Vice-President Frans Timmermans underlined the “do not harm principle” and assured that the recovery fund will be aligned with the “greening” objectives of the strategies. As core parts of the European Green Deal, the two strategies are expected to support the economic recovery.

EU proposed to “halt biodiversity loss in Europe and worldwide and transform its food systems into global standards for competitive sustainability, the protection of human and planetary health, as well as the livelihoods of all actors in the food value chain”.

The Farm to Fork strategy sets indeed concrete targets such as a reduction by 50% of the use and risk of pesticides, a reduction by at least 20% of the use of fertilizers, a reduction by 50% in sales of antimicrobials used for farmed animals and aquaculture, and reaching 25% of agricultural land under organic farming.

But the coronavirus crisis has not pushed the Commission to reconsider the support to animal agriculture. Agriculture is responsible for more than 10 % of the EU’s green-house gas emissions and nearly 70% of those come from the animal sector. Despite the negative impacts of meat production on climate change and public health, the strategy lacks any targets on the reduction of the production.

Asked by The Brussels Times to comment on this, a Commission spokesperson only confirmed the “do not harm principle” and the alignment of the Next Generation funding to the objectives of the Green Deal.

Animal welfare and environmental organisations, while welcoming the two strategies, call for more action to bring an end to the commercial trade in wild animals, the use of cages for farmed animals, and the overconsumption of animal products. They were especially disappointed to see last minute changes that deleted measures to stop the promotion or stimulating of the production of meat.

Will the Commission become more proactive to prevent pandemics?

Under the third pillar, called Addressing the lessons of the crisis, the Commission proposes among others a new health programme, EU4Health, to strengthen health security and prepare for future health crises. The programme has been broken out of the Europeans Social Fund and will become a stand-alone programme with a budget of €9.4 billion.

The funding from Health4Europe is not pre-allocated to the member states but will be allocated based on an assessment of their needs according to an annual work programme

When presenting the programme, Vice-President Margaritis Schinas (28 May) described its main objectives as building resilience in the national health care systems and creating long-term strategic stockpiles of equipment, including medicines. In addition, health-related issues will be embedded in other programmes and considerable funding channelled via them.

Another lesson learn relates to the shortcomings in the data collection, reporting and surveillance by the European Centre for Disease Prevention and Control (ECDC). Commissioner Stella Kyriakides admitted that ECDC’s role had been an issue during the crisis and needed to be strengthened.

There have also been calls to strengthen the roll of the Commission to allow it to act more proactively to prevent the spread of pandemics and decide on coordinated travel restrictions and border controls. This would require treaty changes as regards competencies but the new health programme remains within the framework of the existing EU treaty.

However, Vice-President Margaritas Schinas did not exclude treaty change. “Nothing is off the table. The issue will no doubt be on the top of the discussions at the Future of Europe Conference. Treaty changes are decided by political leaders when the moment is right.”

M. Apelblat

The Brussels Times

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