EU Strikes a Deal on the Largest Budget and Finance Package in History

The package approved at the summit in Brussels includes 1.8 trillion euros. Of these, 1,074 billion euros are allocated within the framework of the seven-year budget plan, another 750 billion euros - to fill the economic recovery program. EU countries have agreed on the largest budget and finance package in their history. This was announced on Tuesday, July 21, by the President of the European Council Charles Michel following the results of a four-day summit in Brussels. “We did it! he wrote on Twitter. The leaders of the 27 EU countries have approved a recovery fund for the economies of the community states called the “Next Generation EU”. The package includes 1.8 trillion euros, of which 1074 billion will be allocated as part of the budget plan for the next seven years, another 750 billion euros is to boost the program for investment support and economic recovery from the pandemic effects. The financial package is designed to stem the massive financial downturn in the EU and to support the EU’s internal market. In addition, the funds will go to support the digital economy and translate it into a format that is more conducive to climate protection. Common EU debts for the first time in history For these purposes, for the first time in history, serious borrowings on financial markets on behalf of the entire European Union are envisaged, which in subsequent years will have to be repaid by joint efforts of all EU countries. On Monday, July 20, the states managed to reach agreements in this regard. For example, the “frugal four”, consisting of Austria, the Netherlands, Denmark and Sweden, agreed to support the loan policy. In response, Germany, France, Italy and Spain have cut their grants to the countries worst hit by the pandemic from € 500 billion to € 390 billion. The funds raised in the form of loans will amount to 360 billion euros. Projects for financing within the framework of the fund must be submitted by the governments of the EU states for approval by the European Commission and the EU Council. At the same time, at least 30 percent of the subsidies and loans allocated to each of the countries of the community should go to projects that will have a beneficial effect on the state of the environment and will bring the community closer to creating a zero-carbon economy by 2050. Linking aid to the EU values The summit participants also managed to agree on linking payments from the EU treasury in compliance with the standards of the rule of law and basic European values. This decision was initially opposed by Hungary and Poland, but as a result, a compromise solution was reached, which was supported by the majority of 27 EU member states. However, new disagreements emerged in the interpretation of this compromise. Thus, the Hungarian media, in particular, reported that the summit was a victory for Prime Minister Viktor Orban. And the Polish agency PAP, citing government sources, reported that linking financial payments to the rule of law has been canceled. In 2017, the European Commission initiated a penalty procedure against Poland, charging it with disrespect for European values ​​and violating the principles of the rule of law. In 2018, a similar procedure was initiated by the European Parliament also in relation to Hungary. In April 2020, the European Commission initiated a new investigation against Poland due to the reform of the judicial system in that country. Warsaw is required to bring it into line with EU standards.