EU Insight, 6 November 2020

Brussels, 6 November 2020

INTENSE EU-UK TALKS CONTINUE WITH MAJOR DIVERGENCES STILL IN PLAY

On Thursday, EU chief negotiator Barnier gave a relatively gloomy assessment to Member States on the status of negotiations with the UK. Serious divergences persist on level-playing field, governance and fisheries – the same three sticking points are still causing problems. Barnier said the UK is pushing for the talks to be escalated to a higher political level, but the EU is resistant until more progress is made. Also, Barnier was not optimistic that a deal will materialise unless the UK changes its approach. Talks are currently on hold but are expected to resume tomorrow in London.

RESURGENCE OF PANDEMIC SIGNIFICANTLY HINDERS ECONOMIC RECOVERY, SAYS COMMISSION

The European Commission adjusted its expectations about the trajectory of the economy for the last quarter of 2020 and the years 2021 and 2022, as the resurgence of the pandemic altogether cancelled any hope for a V-shaped recovery. Presenting the Commission’s Autumn Economic Forecast, Commissioner Gentiloni announced that the EU will face subdued economic growth for the next two years. Member States’ GDP is not expected to recover its pre-pandemic levels before 2023, with the speed of recovery varying across the Union. The Commission hopes that Next Generation EU, with a firepower of €750 billion, will substantially boost the European economy in the years to come.

AGREEMENT ON RULE OF LAW BREAKS DEADLOCK OVER THE EU BUDGET 

The Council and European Parliament negotiating teams reached a provisional agreement on the rule of law conditionality for the next long-term EU budget (or MFF). The new mechanism will enable the EU to stop funding when EU funds are misused directly (e.g. corruption and fraud) as well as when systemic aspects linked to EU fundamental values, such as freedom, democracy, equality, and respect for human rights are infringed upon. The mechanism allocates seven to nine months for EU institutions to adopt measures against a Member State. The provisional deal will now have to be endorsed by both institutions, bringing the adoption of the 2021-2027 EU budget, and the Recovery Package, one step closer.

INVESTEU NEGOTIATIONS TO BEGIN SOON, AFTER COUNCIL AGREES ON ITS POSITION 

This week Member States agreed on a mandate for negotiations with the European Parliament on the revised InvestEU programme, which is part of the upcoming EU budget for 2021-2027. The Council position indicates that the EU guarantee for InvestEU will amount to €23.5 billion, to be provisioned at the rate of 40% and to be distributed across the four policy windows as follows: 35% for sustainable infrastructures; 27.5 % for research, innovation and digitisation; 27.5% for SME support; 10% for social investment and skills support. The Parliament’s plenary is expected to approve its negotiating mandate during next week’s session, paving the way for the beginning of trilateral talks.

COUNCIL SETS CONDITIONS FOR THIRD-STATE PARTICIPATION IN PESCO PROJECTS

This week, the Council set conditions under which non-EU countries can exceptionally participate in specific PESCO projects, in the context of security and defence. Countries applying for projects must share EU values, cohere with EU security and defence interests, and agree to share classified information with the EU, amongst other criteria. When third countries submit applications for PESCO projects, project members will need to agree by unanimity – and the Council will take final decisions on approval in each circumstance. To date, 25 EU countries have made the more binding commitments that PESCO entails, while the involvement of eligible third countries is hoped to enhance EU strategic autonomy going forward.

COMING UP NEXT WEEK

• 8 November onwards: EU-UK intensified negotiations (London).
• 9 November: Video conference of foreign affairs ministers (trade). On the agenda: Trade relations with the United States and China, WTO reform.
• 11-13 November: European Parliament plenary. On the agenda: Outcome of US Presidential elections; general budget of the EU for 2021; Programme for the Union’s action in the field of health for the period 2021-2027.
• 13 November: Video conference of home affairs ministers. On the agenda: Fight against terrorism, migration, and asylum.

Karl Isaksson, Managing Partner Brussels, Kreab

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Kreab • Tel: +32 2 737 6900 • karl.isaksson@kreab.com • www.kreab.com/brussels • Twitter: @KreabEU.