For the EU, deciding how to fund the recovery is only half the battle
EU leaders gear up for debate over how to distribute cash among member state
Europe’s debate over ways of financing the post-corona crunch recovery has been bitter enough, but member states have hardly touched the vexed question of exactly who gets the money.
A taste of how difficult the conversation will be has come with the controversy over the commission’s €37bn Coronavirus Response Investment Initiative (CRII) — an emergency relief effort that was proposed last month.
The cash was gathered from unspent funds in the EU’s cohesion programmes, and was distributed according to the rules that govern the regional aid regime. As a report from the European Stability Initiative think-tank showed over the weekend, this meant that Hungary was a major recipient of the money even though it has by no means been as hard-hit by coronavirus as the likes of Italy.
While Italy received €2.3bn, Hungary, which has a sixth of its population, stood to receive €5.6bn. The inequitable allocation of emergency funding makes plain the need to reform the EU budget process, said Gerald Knaus of the European Stability Initiative. “If this doesn't lead to a wakeup call, then the EU is suicidal,” Mr Knaus told the FT.
The irony of the CRII is that it was adopted the same day the Hungarian parliament gave strongman premier Viktor Orban the right to rule by decree indefinitely. The money represented a windfall for the government of a man who has, according to his critics, brought the country’s judiciary and much of its media to heel while eroding checks and balances and forging ties with Eurosceptics.
On one level, it was hardly surprising that Hungary did well out of CRII. As Elisa Ferreira, the commissioner who oversees regional funds, said on Twitter on Sunday, the CRII was never meant to redistribute money, but rather to make funds immediately available based on existing cohesion envelopes.
But with commission president Ursula von der Leyen promising to make the EU’s budget the engine of the post-corona recovery, the episode marks an early sign of how contentious it will be figuring out universally accepted ways of apportioning future pots of cash.
Already, countries that are heavy recipients of cohesion funding are warning they will not accept a redrawing of the budget that diverts money away from them and towards countries that have been worst-affected by the crisis.
“I suspect the rich countries are going to say we should be using more of the funds we have and migrating them from cohesion policies to the recovery and things like that,” Tadeusz Koscinski, Poland’s finance minister, told the FT. “Any funding for the Covid response should be additional. We shouldn't be touching what's already been agreed.”
For its part, the commission is likely to push for cohesion to be reinforced, rather than raided. After all, central and eastern European countries that are more reliant on cohesion have also been economically clobbered by coronavirus, and they arguably face a steeper climb to get back to economic health given their less advanced economies.
But the EU budget is ultimately decided by the member states. And debate doesn’t end there. A battle is also looming over the criteria that will govern any recovery fund that the EU hatches. Leaders will on Thursday be asked to endorse eurogroup suggestions that a fund should be raised to fuel economic growth once the lockdowns ease.
Some EU capitals are already demanding that the funding should not be too heavily skewed towards the nations most heavily affected by the coronavirus slump. After all, no country has been left unscathed by the crisis.
“This recovery fund must serve everybody,” Pierre Gramegna, the Luxembourg finance minister, told the FT. “I don’t think it should be reserved to those countries that have more problems. It is a symmetric crisis — it must be available to all.”
In his paper, Mr Knaus proposes the creation of a new mechanism to disburse pandemic recovery funds, dubbed a “Solidarity and Democracy Administration”, similar to the way the US administered the Marshall Plan after the second world war. Any EU country could apply for grants from the mechanism — provided it committed to respecting the values of the EU treaties and the verdicts of the European Court of Justice.
For his part, Mr Koscinski simply insists that all the countries need to have a “fair share”. But what seems fair to one EU country is rarely judged the same way elsewhere.