“Not good, not bad, as good as possible” compromise on the EU’s budget

These past days and weeks we heard a lot about the Union’s long term budget and the conditionality of its approval based upon the rule of law, that provoked the blockade of the bloc’s €1.8 trillion package since the vote of veto by Hungary and Poland (as we discussed here on our blog). But finally a compromise was reached during the last meeting of the European Council on 10-11 December.

Ursula von der Leyen, Charles Michel, Angela Merkel - Brussels, Belgium - 11/12/2020 - by European Union, 2020 - Photographer Etienne Ansotte - is licensed under CC BY 4.0 (not modified)”

How did EU leaders manage to do so, overcoming the impasse that was putting in danger the Union’s next seven years spending plan, including the Next Generation EU to deal with the Covid-19 crisis? Did a part end up more satisfied than the other or was a win-win/lose-lose situation? What are the implications in the short and long term following this compromise? And what will happen now? In this article we will try to answer all these questions clarifying the dynamics that lead to the compromise on the Union’s budget and recovery package and the next steps.

On Thursday 10th EU leaders met in Brussels to discuss the much debated Union’s budget and the other important points on the agenda for that meeting: Covid-19 developments, climate change, security and external relations of the EU.

Germany, the current holder of the presidency of the European Council, managed to negotiate a compromise that keeps unchanged the new mechanism on the rule of law but that will not be used until Poland and Hungary will have had the chance to challenge its legality in the Court of Justice of the European Union and get a verdict.

Time pressure played a major role in the negotiations since all Member States knew the potential damaging consequences in case no deal was found: an emergency spending programme for 2021 would have been necessary, resulting in important losses on fundings as we previously illustrated here.