While member states feud over the as-yet nebulous concept of “coronabonds”, the European Commission is turning its attention to a far-reaching rewrite of its proposals for the upcoming seven-year EU budget. Ursula von der Leyen, commission president, on Saturday confirmed this will focus on the recovery phase from the corona-related economic crash that now seems inevitable this year. The final multiannual financial framework (MFF) will be a decision for the member states, not the commission. The last round of negotiations over the MFF in February foundered over differences regarding ways to cover the €60bn-75bn funding gap left by the UK’s departure from the EU. Since then the budget stakes have grown dramatically given calls for a common European response to the corona crunch — and the increasingly bitter divisions among member states that are being exposed.
Discussions inside the commission on how the draft MFF could be overhauled are at an early stage, but officials are aiming to come up with new proposals within weeks. The guiding idea will be to find ways of leveraging the EU’s funds to produce trillions of euros of investment, helping prevent a long-lasting recession that further corrodes support for the EU and energises political extremism. The commission’s initial proposal for the 2021-27 MFF, released in 2018, pegged it at 1.11 per cent of gross national income (GNI), but since then the bloc’s big paymasters have been seeking to bring it much closer to 1 per cent of GNI. Brussels officials think that making the most of the EU’s budget will entail repurposing areas of spending to act as guarantees for wider investments. This would follow a template used in vehicles including the European Fund for Strategic Investments, which was set up by Jean-Claude Juncker, the last commission president, after the euro crisis. One senior EU official said that Brussels could deliver trillions of euros of investment by leveraging up spending of around half a percentage point of GNI using a multiplier of 15. The money would remain targeted at EU priorities including the Green Deal over the course of the seven-year budget, but the goal would be unlocking growth and investment rapidly starting in 2021. The commission will have to scour major budget areas including cohesion — which alongside agriculture is its biggest area of spending — for ways of delivering that added leverage. But one key area will be tapping the “headroom” in the budget — the gap between planned spending and the maximum amount that could be called from member states. This could be exploited to generate extra firepower.
Valdis Dombrovskis, a commission executive vice-president, told the FT on Friday that an “ambitious” agreement would be needed to front-load resources to allow a “real boost of investment” in the post-crisis period. The question, of course, is how soon member states that are facing domestic health and economic emergencies are willing to re-engage with the complex and time-consuming MFF debate. Opinion is divided as to the urgency of the task. Charles Michel, European Council president, has to date struggled to find a path towards consensus, with a near-30 hour summit in February ending with little palpable progress. As a result, any budget deal will come perilously late in the day given the next MFF is due to start in January 2021.This has sparked a debate over whether an emergency budget will be needed for 2021, alongside proposals for the subsequent period. Member states are meanwhile deeply divided over novel and ambitious-sounding schemes such as coronabonds. The way the bloc deploys its more traditional common funding tools — including the EU budget — will be unusually significant as capitals prepare for the massive economic reconstruction task ahead. [email protected]; @Sam1FlemingGraphic du jour: breath of lifeA race against time is under way to build hundreds of thousands of ventilators: the machines that help severely ill coronavirus patients breathe but are in desperately short supply worldwide. The numbers needed dwarf normal industry output, so big-name companies such as General Motors, Airbus, McLaren and Dyson have offered their engineering expertise or factory lines, which in many cases have slowed or halted because of the pandemic. But can manufacturers inexperienced in the field overcome the technical, logistical and regulatory hurdles in time? (graphic via FT)Coronavirus news round-upCorona confusionThe debate over the idea of joint “coronabonds” is becoming increasingly bitter. Over the weekend, Ursula von der Leyen, commission president, struck what some politicians considered to be a dismissive note about the idea in an interview with news agency DPA in which she described the concept as a slogan. Her words provoked an angry response in Italy, which is among nine member states that unsuccessfully attempted to win broad backing for coronabonds at last week’s EU summit. Finance minister Roberto Gualtieri said Ms von der Leyen’s remarks were not conducive to attempts to find common solutions to the economic crisis. The commission then issued an unusual statement late Saturday night in which Ms von der Leyen said the eurogroup had been tasked to come up with proposals. The commission stood “ready to assist” if asked to do so. “At this juncture, the President is not excluding any options within the limits of the treaty,” she added. Mr Gualtieri welcomed the latter assurance. The reality is, however, that as long as Germany remains opposed to the idea it will make little headway (notwithstanding proposals for coronabond advocates to go it alone). The focus of the eurogroup’s work will be on ways of adjusting existing tools controlled by the European Stability Mechanism, the region’s €500bn bailout fund, to make them better suited to the current crisis. For the time being coronabonds remain more a label than a concrete, detailed plan — as Ms von der Leyen’s words implied.
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Pandemic product disputeSeveral countries in the EU and its neighbourhood have rejected batches of Chinese anti-coronavirus equipment or test kits as substandard, stoking concerns about the quality of emergency supplies. The New York Times examines the difficulties Chinese manufacturers face. (FT, NYT)Ventilator crunchDrägerwerk, one of the biggest makers of ventilators, has warned that global demand for the machines that help severely ill coronavirus patients breathe will outstrip supply, despite being on course to quadruple production this year. Stefan Dräger, chief executive of the group, said the situation was especially worrying in the US. “The largest part of production capacity for ventilators is in Europe, while the biggest problem appears to be in the US.” (FT) Spain shutdown confirmedSpain’s government vowed on Sunday it would not give in to pressure from business to rethink its decision to put the country’s economy into “hibernation” to fight the spread of coronavirus. (FT, El País)Grieving aloneAuthorities all over Europe have ordered funeral services to be cancelled or shortened as the effort to stop the pandemic cuts short even last goodbyes. (FT) Elsewhere in EuropeBank clampdown postponedEurope’s financial regulation chief Valdis Dombrovskis has pledged to delay tough new capital rules for banks, saying that support for lending has to be the overwhelming priority in the fight against coronavirus. (FT)
Fortress EuropeSophisticated technology protects the EU’s borders but asylum-seekers say authorities are also using violence to keep them out. The FT’s Erika Solomon reports from the Romania-Serbia frontier. (FT)Elsewhere, Greece’s foreign minister Nikos Dendias accuses Turkey of using migrants as pawns to blackmail the EU. Polish suspensionThe main opposition candidate in Poland’s presidential election has suspended her campaign and called on voters to boycott the poll because of the dangers posed by the accelerating spread of coronavirus. Malgorzata Kidawa-Blonska, from the centre-right grouping Civic Coalition, said holding the poll under the current circumstances would be an “almost criminal act” that would endanger the lives of citizens, and urged other candidates to act responsibly. (FT)Coming up this weekNato foreign ministers are due to hold talks via secure teleconference on Thursday, less than a week after the military alliance welcomed North Macedonia as its 30th member. [email protected]; @mikepeeljourno