EU leaders give the green light to the recovery fund. And now that?


Correspondent in Brussels

Updated:

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The heads of State and Government of the European Union have given the green light to the financial program for the period 2021-2027, which in turn allows the creation of the recovery fund to stimulate the economy after the stagnation due to the pandemic. For this, it was necessary to save the veto of Poland and Hungary, which refused to give their approval if the mechanism of democratic conditionality that had been introduced was not withdrawn.

These are the keys to understanding what happened and its effects.

Why could Poland and Hungary veto the recovery fund?

The money that the European Commission is going to ask for in the debt market to build that recovery fund has to be returned with new rates (on carbon, or on non-recyclable plastic) that are registered in the Budget. The fund itself had already been approved, but the budgets require unanimity. The mechanism of democratic conditionality had been approved by a majority, decoupling it from the budgets, precisely to avoid the veto of any country.

Does the pact that Germany has reached change anything?

Nothing on the background. The only thing that Poland and Hungary have achieved is the guarantee that they can go to the European Court in Luxembourg to rule on the legality of the democratic conditionality mechanism, which for the Council is irrefutable. In case any country wants to ask the judges, it must do so in the next two months.

What is the importance of this mechanism of democratic conditionality?

The EU already had a mechanism to sanction countries that violate the basic values ​​of democracy and the rule of law, Article 7 of the Treaty, but it has proven very slow and difficult to use because in fact it allows the countries themselves indicated influence its application and its most serious punishment would be to lose the right to vote in the Council. The countries that contribute the most to this recovery fund and the European Parliament wanted a more agile formula that is directly linked to the receipt of this money that will have to be returned by citizens of all countries, including those who will not use it and that lend their endorsement to finance those most affected by the pandemic.

When can the disbursements occur?

Spain has already budgeted 27,000 million of this fund for next year, which will be partly non-refundable grants. However, the money will be allocated to specific projects that fall within the Commission’s objectives, which are the energy transition and the digitization of the economy. They cannot be used with discretion for other purposes. In order for them to be received, the Commission first has to launch the debt issue after the entire national ratification procedure that can take months.

What will be the most favored countries?

Italy and Spain are, in this order, the countries with the most money allocated, although in the case of Spain each year we lose half of European funding due to administrative bottlenecks.

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