EU leaders near accord for $860b stimulus plan

Bloomberg

European Union (EU) leaders meeting in Brussels for a second day are closing in on a deal for a 750 billion-euro ($860 billion) stimulus package after the Dutch government indicated support for the direction of the negotiations.
A new proposal unveiled on Saturday, which would keep the overall size of the fund the same but reduce the amount distributed as grants by 50 billion euros, is a major step in the right direction, according to a Dutch official familiar with the talks, who asked not to be identified because the process is private. The new plan would see 450 billion euros disbursed as grants and an EU official said it was garnering considerable support around the room.
The talks are advancing after the first day of the summit ended in acrimony, leaving
the bloc’s plan to help its economies heal from the coronavirus hanging in the balance.
At stake is not just the amount of funds that will be given to countries, but the ability of the EU as a whole to offer meaningful solidarity to its 27 members and push through unprecedented financial integration.
Most leaders are seeking a decisive response from the bloc with more than 100,000 Europeans dead from Covid-19 and their economies battered by the lockdown. Yet sitting together in Brussels for the first time in five months, they spent much of the Friday rehearsing their starting positions and bickering over a Dutch request for a mechanism that would allow member states to hold up the disbursal of funds.
In a nod to Dutch demands, the new plan would include a “super emergency brake” that would allow a single member state to hold up a disbursement if it had questions about whether the funds would be used appropriately. Governments would have three days from when the commission approves a payment to raise their objections and then the matter would have to be addressed by either EU leaders or finance ministers.
Dutch Prime Minister Mark Rutte has insisted he won’t allow handouts to the southern members hardest hit by the virus without cast-iron guarantees the money will go, as intended, to projects that will upgrade their economies. Other countries, and the commission, which traditionally polices national spending plans, are worried that too many constraints would make the fund unworkable and store up political problems for the future.
The mechanism gives individual countries more say over how the money is spent, but it would also require any issues to be dealt with quickly. Finance ministers could also handle disputes, addressing concerns by several governments that escalating the issue to leaders would overly-politicize the process and lead to delays.
The overall package under discussion by EU leaders is worth about 1.8 trillion euros. Just over 1 trillion euros will be distributed in grants from the bloc’s regular budget with another 750 billion euros from the emergency stimulus package. Germany contributes the lion’s share to the bloc’s budget.
Almost a third of this total will have to be committed to projects transforming the EU into a low-carbon economy. Expenditure that’s not consistent with the Paris Agreement on climate change won’t be approved, thus making the potential deal the biggest green stimulus the world has ever seen
The plan would also introduce new ways for the EU to generate revenue, including a tax on non-recycled plastic waste that would be implemented by January 2021. The EU would also put forward proposals in the next year on a carbon border adjustment mechanism and a digital tax, which would take effect by January 1, 2023, at the latest.
The new proposal says that rule-of-law “conditionality under the regime will be genuine,” and that when transgressions are identified, the European Commission will propose “appropriate and proportionate” measures that will be approved by qualified majority.