After the Twenty-Seven reached an agreement on a financial package of 1,800 billion euros in July 2020, the European Parliament and the Council validated this unprecedented amount in December, which includes a multi-annual budget of 1,074 billion euros and an envelope of 750 billion euros intended to finance the European recovery plan. The task now is to invest the money at the member state level and to limit the economic divide between the North of the continent and Southern and Eastern Europe, as well as to establish the own resources intended to repay the contracted loan.
By April 30, 2021, member states will need to have submitted their recovery plan proposals to the European Commission and the Council, which must validate them within two months. These national versions must meet certain criteria set by the European executive regarding the allocation of expenditure (notably towards ecological and digital transition). Keen to exercise tight control over the use of these funds, the so-called “frugal” countries have pushed for member states to be able to appeal to the European Council if any of these national recovery plans seem problematic to them, opening the door to potential negotiations on the subject during the year.
Another subject that has already been the source of intense tensions among the Twenty-Seven is the mechanism for suspending access to European funds in the event of non-compliance with the rule of law. Hungary and Poland temporarily blocked the adoption of the long-term budget — and by extension the recovery plan — in opposition to it. Theoretically effective from 2021, this mechanism is effectively suspended pending a potential opinion from the Court of Justice of the European Union when it is seized on the matter.
Following the implementation of the tax on non-recycled plastics on January 1, the EU must advance the implementation (entry date and operational details) of other own resources scheduled on its agenda, with the first expected by 2023. A proposal from the Commission on the carbon border adjustment mechanism is expected before June 2021. These own resources have significant budgetary and symbolic importance because they would allow the European Union to be less dependent on the contributions of member states, which currently represent about 70% of its revenues. The timeline for implementing these taxes must still be ratified by the national parliaments.
Finally, the year 2021 will also provide the EU with the opportunity to continue finalizing the banking union, an area on which the Eurogroup made a decisive step forward in November 2020 by approving a reform of the European Stability Mechanism. This could now intervene as a last resort to prevent a banking failure, which the Italian finance minister Roberto Gualtieri described as an “additional safety net for the stability of the banking system“.
The reform now needs to be validated by the national parliaments. The deposit protection system is still under negotiation among the Twenty-Seven. It would allow the harmonization of depositor protection across the EU, thereby preventing massive withdrawals and bank failures in times of crisis.
