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EU Leader, German Chancellor Urge Progress On EU Budget

By Matt Thompson · October 15, 2020, 4:12 PM EDT

Time is running out to agree on the European budget for the unprecedented coronavirus recovery fund, the president of the European Union's executive branch, the European Commission, said Thursday, echoing comments by German Chancellor Angela Merkel.

Speaking before a meeting of the heads of government of the 27 EU member countries, Ursula von der Leyen, the European Commission president, told journalists that all parties in negotiations between the representatives of the bloc's governments and the European Parliament need to understand that the bloc's budget must be approved before the much-needed funds can begin to be disbursed to countries.

The commission has been authorized by its members to raise money on international markets to fund the €750 billion ($877 billion) recovery package, and the Parliament and the bloc's councils are currently negotiating on a budget. The European Council is made up of the member countries of the European Union; the Council of the EU is composed of their diplomats, with Germany currently holding the six-month rotating presidency of both, and therefore leading discussions on their behalf.

Three key issues remain in the discussions: the new revenue streams and quasi-tax measures that will be used to raise revenue at the EU level, known as "own resources" in EU jargon; the rule-of-law conditions attached to the receipt of recovery funds; and budget ceilings and ratios.

Candidates for the new revenue streams include a plastics tax, levies on aviation fuel and maritime fuel, a carbon border tax and a new tax on digital services.

The creation of new own resources was approved by the bloc's Parliament in September but must be approved by the national parliaments of the EU countries. The revenue streams are the legal basis for the bloc's budget and must be approved before the budget can be implemented.

"We still need to go through the ratification process in the member states, and only then the commission can start raising the money on the market," von der Leyen said, "The European economy badly needs this investment now."

Merkel, who holds the six-month rotating presidency of the European Council, told journalists at the same event that the finance negotiations "are in a decisive stage." Results are needed quickly, she added, because the new revenue streams must be approved by national parliaments.

"We want, on the side of the European Council, to ensure that at the beginning of next year we have results," Merkel added.

Poland and Hungary — both of which are often accused of backsliding into authoritarianism — have reservations about making respect for the institutions of liberal democracy a condition for receiving EU money.

The rule-of-law conditionality is the "tricky part," Michael Roth, the German minister for Europe, said Tuesday. Meetings were held with representatives from the Parliament Monday to attempt to find a way forward on the whole budget — although a spat broke out Wednesday evening about the budget ratios.

"We will find common ground if everyone is willing to work out a compromise," Roth said.

--Additional reporting by Todd Buell. Editing by Joyce Laskowski. 

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