Deal reached on EU recovery fund package

Germany's representative says plan 'urgently' needed to cushion heavy impact of pandemic

The German presidency of the Council of the European Union reached an agreement on Tuesday with European Parliament negotiators for the EU's recovery fund package, paving the way for reviving the bloc's economy, which was hit hard by the COVID-19 pandemic.

The agreement, reached after 10 weeks of haggling, still needs to be endorsed by the Parliament and 27 member states of the European Council.

"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. Germany holds the presidency of the Council of the EU during the second half of 2020.

"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," he said.

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 ($2.14 trillion) 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 a compromise deal, it obtained 1.6 billion euros on top of the package agreed to by heads of state or government at their July summit. It includes 1.5 billion euros to reinforce flagship programs to protect citizens from the COVID-19 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," said Johan Van Overtveldt, chairman of the Parliament's Committee on Budgets, in a statement. "This fund is very important to get through the crisis, but it stands or falls with its use.

He added: "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 economics think tank, said the EU plan needs more clarity on economic aims, its priorities and the content of the contractual arrangements that it should entail between the 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 its 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 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.

"Help is needed for citizens and business badly hit by the coronavirus crisis. Our recovery plan will help us turn the challenge of the pandemic into an opportunity for a recovery led by the green and digital transition," she said.