Thread by @SMerler

🔎After reading the 68 pages of Council conclusions, here are m 2 cents on the #EUCO #NextGenerationEU deal 1/

The total amount of funds available under #NextGenerationEU remains 750bn as in the original EC proposal, but the composition changes: grants fall from 500bn to 390bn while loans increase from 250bn to EUR 360bn. But the composition of cuts matter 2/

⬇️Here is a comparison of program allocations as per the original proposal and the current deal. While the grants in the Recovery Fund (RRF) has been preserved, the cut in grants has concentrated on programmes that would have financed truly European public goods. 3/

HorizonEU (research), cut by 62%; InvestEU cut by more than 80%; Just Transition Fund slashed by 2 thirds; 3 programs completely de-funded, among which Solvency Instrument, that could have allowed for EU-level solvency aid to firms in countries that could not afford it 4/

National allocations of grants remain in line with what I had shared earlier. Applying the EC’s RRF key across the whole 390 bn (as a simpification), 🇮🇹 still gets around 30 bn in net fiscal transfers, equivalent to returned ~7 years of net contributions into the EU budget ⬇️5/

Conditionality: countries will need to start paying attention to the EC's country-specific recommendations (CSR), as that will be the benchmark against which national spending plans will be assessed under #NextGenerationEU. That means structural reforms. 6/

Governance: EC's assessment of plans needs approval by Council at qualified majority (QMV, 15 countries for at least 65% of population), in 4 weeks. Fortunately 🇳🇱 call for veto did not go through: veto on plan + CSR would have made this look very much like an ESM programme. 7/

Disbursements is where emergency brake comes in. The assessment of milestones achievement is done by EC, but in "exceptional" cases 1 or more members can ask for referral to the Council if they consider that there are "serious deviations from the satisfactory fulfilment". 8/

This gives to some the chance to slow down disbursement process, but not to stop it, as ultimately the Commission prevails (as outlined by the sentence: "process will be in line with Article 17 TEU and Article 317 TFEU"). We dodged a bullet and Rutte can spin this electorally. 9/

Rebates: 🇳🇱🇦🇹🇸🇪🇩🇰and all get increased rebates. Per year they will get: 1.9 bn for 🇳🇱, 1.1 bn for 🇸🇪, 565 mn for 🇦🇹, 377 mn for 🇩🇰. The German rebate is unchanged at 3.7 bn per year. Rebates total around 53 bn over the seven-year budget period. who pays? 10/

In the past, 🇫🇷 🇮🇹 and 🇪🇸 have been paying respectively 30%, 22% and 15% of all rebates. If this stays the same, 🇫🇷would be liable for ~16 bn (~2bn per year); 🇮🇹 for ~11bn (~1.6 per year); 🇪🇸 for ~8bn (~1.1bn per year). For 🇪🇸 and 🇮🇹 this lower the net fiscal transfer effect 11/

Conclusion:

This remains a positive steps for 🇪🇺integration because it overcomes 2 historic taboos: (i) opposition to large size common issuance; (ii) opposition to explicit fiscal transfers (even if temporary). 12/

Conclusion:

However it comes at a cost. First, the increase in rebates perpetuates and worsens a problem that we know from before this MFF. In particular, Germany could have accepted a decrease in its rebate to compensate for the frugals' demands but did not. 13/

Conclusion:

Second, the cuts to grants are concentrated on programs that would have paid for genuine EU-level public goods and hence could have help create a bridge from #NextGenerationEU towards something permanent and federal. This is a negative for the longer term imho 14/

Overall, given where we were in March and where this #EUCO had started, this is certainly a positive and major development. At the same time, there are shadows that probably make it less ambitious (especially over a long-term integration horizon) than initially expected. end/