European Council reaches €1.82tn budget agreement with parliament

With the International Energy Agency having today praised the Covid-19 recovery package envisioned by Europe, the EU Council has reached agreement with the negotiators of the bloc's parliament to progress the next seven-year budget.

The €1.82 trillion deal will be put to the parliament's MEPs and the EU's 27 member states for endorsement with European Commission president Ursula von der Leyen expressing a desire to have the package signed off this year.

After the commission had drawn up plans for the budget, the Council of Ministers in July proposed a €1.07 trillion figure for 2021-27 and agreed to the commission's suggested €750 billion Covid recovery fund, dubbed Next Generation EU.

The budget thrashed out by negotiators from the parliament and the German-chaired EU Council since the end of August, the council announced today, includes €12.5 billion extra for programs including the Horizon Europe research initiative, as well as €2.5 billion of reallocated cash for such schemes.

The European Commission had originally proposed, in late May, €1.1 trillion for the next budget, plus the €750 billion post-Covid stimulus package for a total €1.85 trillion, with the ‘Green Deal for Europe‘ including a Strategic Investment Facility aiming to leverage €150 billion for renewables and energy storage capacity out to 2027.

Announcing the deal with parliament, German permanent representative to the EU Michael Clauß said: “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.

“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. We are now in a position to take the next crucial steps in the process – submitting the different parts of the package to the member states and the parliament for endorsement.

“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. I hope that everyone understands the urgency of the situation and will now help to clear the way for the swift implementation of the EU budget and recovery package – no one needs new hurdles and further delays.”

The commission on Tuesday welcomed the budget deal, which commits to spend at least 30% of the overall figure – €546 billion – combating climate change. To help finance the budget, the commission has pledged to propose, by June, a carbon border mechanism to tax imports with a heavy carbon footprint and to revisit plans for a digital levy of 3% to be paid by online companies with annual revenues of more than €750 million, of which at least €50 million is taxable in the bloc. If agreed by the parliament and EU Council, such measures would take effect before 2023. The commission said it would also consider proposing, by June, an extension of the EU's emissions trading scheme to the aviation and maritime sectors and said it would reconsider proposals for a financial transaction tax and a new corporate tax contribution, before June 2024.

Whether the continuing negotiations between the EU and the U.K. over a post-Brexit trade agreement put a fly in the ointment remains to be seen. As it stands, those negotiations must finish this year.

This copy was amended on 12/11/20 to include details provided by the European Commission in relation to the budget agreement between EU Parliament and Council of Ministers negotiators.