Over recent days, I attended a special meeting of the European Council in Brussels. The meeting, which was the first physical meeting of EU leaders since February, began on Friday, 17 July, continued throughout the weekend and concluded in the early hours of yesterday morning, 21 July.
Even aside from its duration, this was by no means a normal European Council meeting. We met against the backdrop of the Covid pandemic, which has affected the economic, political and social well-being of our continent, and further afield, over the course of the past number of months.
This was visible in the special health and sanitary precautions put in place on the ground for the European Council itself. It was also to the forefront of every Leader’s mind as we worked over the course of four days to agree an unprecedented budgetary package to address this unprecedented collective challenge.
Despite the unusual circumstances and the gravity of the agenda, I was glad to have an opportunity to meet my EU counterparts for the first time since becoming Taoiseach.
As I informed the House last week, I travelled to the European Council ready to approach discussions in a constructive manner. I was also clear that I would only agree to an ambitious deal for Europe, and to one that protected Irish interests.
I am pleased to report that, despite sometimes very difficult negotiations, we succeeded in reaching agreement on a fair, balanced, and ambitious €1.8 trillion package to support Europe’s economic recovery, and to drive the climate and digital transformation on which our future well-being and prosperity rely.
Yet much of the commentary over the course of the summit and since has dwelt on how long it took, or on seemingly acrimonious exchanges between some leaders.
However, that ignores or dilutes the complexity and significance of what was at stake and what was achieved. Every seven years, when the EU negotiates its next seven-year budget, the discussions are long and difficult.
This year, those negotiations took place against the backdrop of Brexit, meaning the absence of the UK - a formerly sizeable net contributor - from the equation.
Additionally, and most significantly, we were attempting to craft an unprecedented and ambitious instrument to respond to a health and economic crisis on foot of a pandemic that we didn’t even know of a few short months ago.
While the focus of the meeting was predominantly on the MFF and Next Generation EU budgetary package, on Friday we also endorsed the European Semester 2020 country-specific recommendations and recommendation for the euro area.
Relations between the EU and Turkey and between the EU and Russia were also raised in the course of the meeting. Minister Byrne will provide more detail on these matters in his wrap up remarks this afternoon.
MFF and Next Generation EU budgetary package
The European Council began on Friday morning with an exchange of views with the President of the European Parliament, David Sassoli.
While most of our discussions on Friday took place in plenary meetings, from Saturday onwards, the pattern of meetings varied between plenary meetings and meetings between the President of the European Council, Charles Michel and different groupings of Member States. The President of the Commission, Ursula von der Leyen, also played an important role in our discussions.
I presented Ireland’s position to President Michel, including in a joint meeting that I and the Prime Ministers of Belgium and Luxembourg had with him and the President of the Commission on Sunday.
Intensive discussions more generally largely focussed on five key issues:
•the overall amounts in the budget and recover proposal, and the distribution of funds across programmes
•the balance of grants and loans;
•the allocation of the new Recovery and Resilience Fund and its governance;
•a rule of law mechanism to protect the EU budget; and
•rebates for the highest net contributors.
As the House will be aware, there were significant differences in particular between a small number of net contributor countries that took a firm position in relation to the overall size of the Recovery Fund and the proposed balance of grants and loans.
Those same Member States were also calling for a governance framework for disbursing funds that would give the Member States more oversight on whether the funds deliver the objectives set out in Member States’ Recovery and Resilience Plans.
A number of net beneficiaries, particularly those most affected by the Covid crisis, sought to protect the overall size of the Recovery Fund as proposed in the Negotiating Box on the table, and grant elements in particular.
There were also strongly held views around the table on the link between Rule of Law in Member States and the operation of the Union’s budget, an issue that has been pulled into sharper focus by developments in some Member States in recent years.
In my interventions, in addition to insisting that Ireland’s concerns had to be addressed, I sought to take a constructive and positive role, working with others in support of an outcome of sufficient scale to enable Member States, particularly those most affected, to respond to Covid-19 and to help their economies recover.
In this, I made clear my view that the package had to include a large volume of grants, as well as loans. Where Member States are facing into a crisis of this dimension already burdened with significant debt, it was not appropriate to offer a solution based only on making further debt available.
I was also clear that a significantly smaller budget – as some were arguing for – would not have enabled us to deliver our priorities as a Union. CAP and Cohesion are successful programmes that work and that are deserving of continuing support. Similarly, in coming years, the Union will need resources to enable it to undertake climate and digital transformations in a fair, balanced and just manner. We will also need to be in a position to support those most affected by Brexit.
I am pleased to report that a compromise proposal tabled by the President of the Council was ultimately accepted unanimously by the European Council.
Key Elements of the Package
I hope it will be helpful to deputies if I briefly outline the key elements of the package and the significant benefits of this deal for Ireland.
In summary, the size of the Recovery Fund was preserved at €750bn with a balance of €390bn in grants and €360bn in loans.
A new allocation methodology was agreed, with 70% of the Recovery and Resilience Fund committed over the next two years, and the remaining 30% allocated in 2023 based on the measured economic impact of the crisis over this year and next.
A new seven-year budget of €1.074 trillion was agreed with substantial funding for Cohesion, CAP, Erasmus, Horizon, migration and asylum, and the EU’s Neighbourhood and Development Instrument.
To support climate action an ambitious target has been agreed, with 30% of spending in the budget and recovery fund to contribute to climate action, including meeting the objectives of the Paris Agreement and EU climate neutrality by 2050.
A Just Transition Fund will be established with more than double the funding originally proposed before the Covid crisis.
Benefits for Ireland
I am pleased to report to the House that the outcome is one that fully protects Ireland’s interests and that delivers on our priorities.
As I have said many times, an EU recovery is of vital importance to our own economic interests and this agreement sends a strong signal that the EU is determined to chart the pathway to recovery together and in solidarity. It demonstrates that Europe works for its citizens.
Ireland benefits greatly from membership of the Single Market and access to a market of over 450 million people. This substantial €1.8 trillion package will not only help to drive recovery, but it will also support the transformation of our economies in line with the climate transition, research and development, and digital agendas. This is not only fully aligned with priorities in our Programme for Government, it will open a wealth of opportunities for Irish enterprises.
Like its predecessor, the Government made clear that for Ireland maintaining a strong Common Agricultural Policy – one that supports our farmers, farming families and rural development - was a priority. I am pleased to inform the House that the outcome is a very good one in that regard.
The initial proposals made by the Commission just over two years ago would have reduced the proportion of the budget for CAP to just 28%. The final agreement now sees this increased to 31%. From an Irish perspective, I can confirm to the House that current levels of funding for Ireland have been maintained.
This includes a special allocation of €300m for Ireland in recognition of structural challenges facing our agricultural sector.
Given the very significant pressures to reduce the funding available for CAP, this is a very significant achievement.
I also very much welcome the inclusion of a Brexit Adjustment Reserve of €5 billion to address the impacts on sectors and regions most impacted by Brexit. It is clear that for some Member States the economic damage of Covid19 will be compounded by the impact of Brexit, the real effects of which will be strongly felt from the start of next year.
Now that the special allocation has been agreed, the Government will work hard to ensure that a significant portion will be available to support Ireland and Irish enterprises.
We have already had to make significant investment in infrastructure, including customs infrastructure, as result of Brexit. The increase to 25% in the amount of collection costs for customs duties that a Member State can retain is therefore especially welcome and appropriate.
We will also receive funding under the recovery fund over the next two years, with further funding to be made available in 2023 for those most impacted economically by the crisis. Again, we will be working to maximise Ireland’s draw-down.
We will also receive structural funds worth over a billion euro for our regions.
The €120 provision for a new PEACE PLUS programme, will help to build a significant fund to further reconciliation and North-South cooperation, and continue the work of the current PEACE and INTERREG programmes in a post-Brexit context.
This is not only of real and practical benefit to those who will benefit, it is a strong and symbolic signal that the EU will continue to stand beside the people of Northern Ireland as it has done throughout the peace process and throughout Brexit.
I am also pleased to note the increased provision for Horizon under this MFF when compared to its predecessor. The Government wants Ireland to be at the cutting edge in research and development and we will work to ensure that Departments and agencies pro-actively support Irish researchers, institutions and enterprises in accessing this important funding.
As the House is aware, in the past Ireland has been a significant recipient of EU funding – and this was a vital contribution to our economic development. Our recent economic success means that we are now in a position to show the same solidarity to others that we have received. Over the next seven years, we will contribute more than we will receive.
This should be a source of pride to Irish people. Since joining nearly 50 years ago we have benefitted greatly in economic, social, environmental, and financial terms. Now that we are in a position to do so, it is appropriate that we should extend the same opportunity to others.
Of course, this is not simply a selfless gesture. An economically strong EU – recovered from the Covid19 crisis and transformed to meet climate and digital goals – is essential to our own economic well-being.
Our annual contributions to the EU budget and recovery fund in the years to come while significant, will be very small when compared to the over-whelming benefits we gain as part of one of the world’s largest single market and trading blocs.
The reduction in grant elements during the negotiations, while not our objective, will nonetheless mean a lower cost to Ireland than originally proposed. Any new Own Resources – such as the new tax on non-recycled plastics - introduced over the course of the budget could also reduce the cost.
Overall, what was agreed by the European Council is a substantial and significant package of measures which will support the EU’s recovery and help to equip it well for the future.
It protects Ireland’s interests – on CAP, on Brexit, on climate action - and delivers substantial funding for our priority EU programmes.
Most importantly, it sends a message that even in the most testing of times, even when there are strong divisions on the right approach and the best way forward, EU leaders can work together and find a compromise that delivers for our citizens.
The message from this weekend’s summit could so easily have been one of failure and division. Instead, it was one of success, coming together and unity.
In the middle of the greatest challenge we have faced, there could not have been a better outcome.