Many leaders, including Commission President Ursula von der Leyen and Council President Charles Michel, have cited a need to reach a deal as quickly as possible, given the giant economic shock of the pandemic and that the EU’s new budget must start on January 1.
Merkel echoed that sentiment in a speech to the European Parliament on Wednesday afternoon.
But in a Commission summary of the mini-summit on Wednesday evening, leaders expressed heightened urgency.
“The participants stressed that it would be essential that Heads of State and Government reach an agreement during this European Council meeting in order to allow the interinstitutional negotiations to start,” the Commission said.
Wednesday’s high-level discussion itself was a victory for European Parliament President David Sassoli, who demanded the session take place. He has been pushing hard to remind other EU leaders that the Parliament must also approve the budget deal, and to assert a role for the chamber in a process that has traditionally focused on backroom horse-trading between prime ministers and presidents.
The Parliament is particularly intent on the issue of creating new revenue streams for the EU budget, known as “own resources,” or on expanding existing sources of revenue. Such proposals face serious resistance in some national capitals. Among the ideas that have been floated are a carbon border tax, a tax on plastics, and a new digital tax on tech giants.
The Commission has said that such revenues would make it much easier to pay for the central component of the proposed recovery effort — a plan for EU countries to take on €500 billion in joint debt in order to disburse grants to EU countries in need of help.
It is on this point that deep, rigid philosophical differences persist, with so-called frugal countries like the Netherlands fiercely resisting the idea that their citizens should take on debt obligations in order to provide grants. Those objections were reiterated by some diplomats in a meeting Wednesday afternoon of EU ambassadors. Opponents of the “loans-for-grants” concept are fighting to keep tight control on spending decisions in the capitals, and avoid ceding such authority to the Commission.
Merkel and French President Emmanuel Macron support the grants initiative, but any one EU country can veto the budget-and-recovery package.
This article is part of POLITICO’s coverage of the EU budget, tracking the development of the seven-year Multiannual Financial Framework. For a complimentary trial, email [email protected] mentioning Budget.