Watch: In the face of a crisis, EU leaders’ differences persist

EU leaders may agree on the need for a strong response to the economic crisis created by the Covid-19 pandemic, but a four-hour videoconference failed to bring them any closer to agreeing on how the EU should be involved.

The last physical summit – held last February – was itself marked by a failure to reach an agreement over the EU’s long-term budget for 2021-2027.

Leaders now also have to contend with a proposed €750 billion Covid-19 recovery plan, but the same fault lines remain. On one end, a sizeable proportion of member states – including net recipients of EU funds – have generally argued for generous funding. But among net contributors to EU funds, the so-called Frugal Four – Austria, Denmark, the Netherlands and Sweden – are staunchly opposed to taking up more debt to help other countries.

As far as the 2021-27 Budget was concerned, Malta was firmly part of the Friends of Cohesion group, which oppose cuts to the cohesion funds allocated to less-developed areas of the EU.

But the Maltese government has strong reservations on the proposed recovery package, with Finance Minister Edward Scicluna expressing concerns that it may see the country become a net contributor to EU funds. In a videoconference of finance ministers, Scicluna argued that the recovery plan should only include modest grants, a position that is close to that of the frugal group.

EU leaders not only disagree on the ratio of grants to loans in the recovery plan; the way the funds will be allocated to each member states is also a source of fierce dispute. Scicluna had argued that the way funds were allocated put Malta at a disadvantage; among other things, by taking into account its low pre-pandemic unemployment rate.

Time running out

At the press conference following the online summit, European Council President Charles Michel and European Commission President Ursula von der Leyen both said that the discussion was positive, though both also warned that there was no time to lose.

“Just as we are six months away from the end of the [Brexit] transition period, we are now also six months away from the end of the current MFF – and in the midst of the deepest economic crisis provoked by COVID-19. It is therefore essential that we lose no time in setting our economic and social recovery on a firm footing,” von der Leyen pointed out.

Michel emphasised that the videoconference was the first occasion in which EU leaders could discuss the proposed recovery, and said that there was “an emerging consensus” on a number of issues, which he deemed very positive.

“But at the same time, we don’t underestimate the difficulties. And on different topics we observe that it is necessary to continue to discuss,” he added.

What leaders could agree upon unanimously, according to von der Leyen, was that “the severity of this crisis justifies an ambitious common response.”

“I was also glad to hear that many Leaders stressed that we must do everything in our power to reach an agreement soon in the European Council before the summer break. There is a real understanding that the effectiveness of the response depends on this, too,” she said.

With Covid-19 restrictions being eased across the bloc, EU leaders are now planning to hold a summit – a physical one – in mid-July.

July will see Germany assume the rotating presidency of the Council of the European Union, and Chancellor Angela Merkel telling the German Parliament that this came as the EU faces “the greatest challenge in its history.”

She emphasised the need for unity, warning that there was the danger of a “permanent deep rift in Europe.”

The Brexit issue

Brexit was also brought up during the summit, and as is the case with the recovery plan, it is another major issue on which agreement remains elusive whilst time is running out.

Though the EU would be ready to entertain such a possibility, the UK has refused to extend the Brexit transition period – which ends on 31 December – even if that meant a “no-deal” Brexit.

Both Michel and von der Leyen emphasised that while the EU strongly wished that an agreement is reached – a “one-of-a-kind partnership,” according to von der Leyen – this would not be reached at any cost.

The Commission President also emphasised that even if a deal is reached, there would still be many changes in the way the EU, its citizens, businesses and governments deal with the UK.

Brexit itself is, arguably, at the heart of the budget disagreements member states find themselves in. The departure of the UK has meant the loss of the second-largest net contributor of EU funds, creating a gulf between desired funds and the willingness to contribute them that has proven too wide to bridge, at least for now.