Vulcan Insight

Franco-Dutch dinner date to advance MFF and Recovery Fund talks

26 June 2020

Ahead of their first in-person summit since February, to be held in July in Brussels, French President Emmanuel Macron and Dutch Prime Minister Mark Rutte discussed the EU’s next multi-annual financial framework and the Commission’s proposal for a €750 billion Recovery Fund on Tuesday (23 June).

As European Council President Charles Michel announced that EU Heads of State and Government would convene physically for the first time since the COVID-19 crisis, on 17-18 July, the French and Dutch leaders convened for a working dinner in The Hague to advance the complicated and somewhat fractured negotiations ahead of the summit.

While last week’s virtual summit was broadly seen as an initial exchange of views on which more detailed negotiations could build, Council President Michel and a majority of EU leaders are now looking at the July meeting to hammer out a final agreement before the summer recess. A July agreement would allow the German Presidency of the Council of the EU sufficient time in the autumn for negotiations with the European Parliament. Under the EU’s treaties, the Parliament may veto the budget proposal if it considers it insufficient.

In comments after the meeting, Mr. Macron said “from now until the European Council in July, we have to convince our partners [on the Rescue package]” and that “everyone must be heard” in the ongoing negotiations.

To the French President and his German counterpart, Chancellor Merkel, convincing Mr. Rutte and the Netherlands is a key element in getting the MFF and Recovery Fund across the line. As a member of the so-called “Frugal Four”, the Netherlands, together with Austria, Denmark and Sweden is looking to reduce the overall volume of the MFF and the Recovery Fund, as well as significantly change the Recovery Fund’s balance of grands and loans. Contrary to the Commission’s proposal, the Frugal Four are looking for the post-COVID-19 economic assistance to primarily be in the form of loans and strictly tied to structural economic reforms.

Mr. Macron hopes that by reassuring the Netherlands that the proposed mutualisation of COVID-19-related debt to raise funds on the financial markets will not bring what Austrian Chancellor Sebastian Kurz calls a “debt-union through the backdoor”. But rather, that this one-time sign of solidarity will strengthen the EU, its Single Market and the overall European economy. For the Netherlands, home to the EU’s largest port, the latter in particular is critical for its domestic economic success.

Mr. Macron will continue his tour d’Europe on Monday with a trip, on the eve of the German Presidency of the Council of the EU, to meet Chancellor Merkel at Meseberg castle outside Berlin to further strategise their approach of the upcoming Budget summit.