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77% of Europeans insist EU funds be linked to respect for Rule of Law and democratic principles
by European Parliament, news agencies
Brussels, 17. Nov. 2020
Hungary and Poland block EU budget and corona package, by Eszter Zalan for the EU Observer
Hungary and Poland on Monday (16 November) blocked the adoption of the €1.8 trillion new long-term EU budget and the coronavirus recovery package, in their dispute over linking EU funds to the respect of rule of law.
At an EU ambassadors' meeting, the two countries blocked a key step in the process, the adoption of the EU's so-called "own resources" legislation, which sets out the revenue the bloc itself can raise.
The EU commission said the adoption of the own resources decision is needed both for the 2021-27 EU budget and the recovery fund.
The two member states "expressed reservations" with regards to the rule of law conditionality, but "not to the substance" of the budget agreement, a spokesman for the German EU presidency said.
At the same meeting, a majority of member states adopted the rules on linking the distribution of EU funds to the respect of rule of law by member state governments. Only Poland and Hungary opposed the adoption of the new mechanism.
The two countries are already under scrutiny over breaking EU rules and values in the Article 7 sanctions process.
Monday's block means neither the budget, nor the recovery funds - both crucial for pumping EU funds into a European economy ravaged by the pandemic - can be up and running any time soon. A senior EU diplomat said earlier the blockage would throw the EU into a "crisis".
"We will be likely in crisis again. I cannot tell you exactly when all this will be up and running, certainly there will be delays," the diplomat added.
German chancellor Angela Merkel, European Council president Charles Michel, EU Commission president Ursula von der Leyen and EU leaders will now be involved in discussions on how to move ahead.
"There is already talks behind the scenes, and I expect this to increase, to find the way out of this crisis that we are about to hit this afternoon," the diplomat said on Monday.
Most national parliaments also need to ratify the 'own resources' decision, which has already meant money from the recovery fund would likely only start to flow to EU countries in the second quarter of 2021. That date now could be delayed.
EU leaders are scheduled to have a videoconference on Thursday, where the issue is likely to be raised. But diplomats warned it could be weeks before a solution is found.
"They broke it, they fix it," said another EU diplomat, referring to the two countries, adding that "by meeting Viktor Orban's demands, we don't solve anything".
The European Parliament - which still needs to vote on the EU budget in its plenary - is also unlikely to agree to water down of the rule of law conditionality.
Budget commissioner Johannes Hahn said he was disappointed by the outcome of the meeting. "I urge member states to assume political responsibility and take the necessary steps to finalise the entire package.This is not about ideologies, but about help for our citizens in the worst crisis since the Second World War!," Hahn tweeted.
German MEP Manfred Weber, who hails from the same political family, the European People's Party (EPP), as Hungary's prime minister Viktor Orban, said that "everybody who respects the rule of law has nothing to fear of this mechanism".
"The Hungarian and Polish governments should stop creating this fictional opposition between themselves and the values that are part of our treaties. There is no such opposition. The peoples of Europe have one single enemy at the moment, and that is the coronavirus, and they expect us to deliver now," Weber warned in a statement. The EPP has provided political cover for Orban's party for years but suspended its membership last year.
The German EU presidency and the European Parliament concluded talks on the EU budget and rule-of-law conditionality in the past two weeks.
The rule-of-law conditionality would mean that if there is a breach of EU values and rules that can be demonstrably linked to EU funds, the commission can then recommend the suspension or freezing of the funds, if the majority of member states concur.
EU leaders in July - where, during an epic five-day summit, they hammered out the main numbers of the long-term budget - also tried to define the rule-of-law conditionality, but the outcome was left vague.
And while Hungary and Poland had opposed the mechanism, the Netherlands, Finland, Denmark, Sweden, Luxembourg, Belgium and Austria have pushed for a stronger link.
Both Polish prime minister Mateusz Morawiecki and Orban have said they will block the key elements of the package.
Oct. 2020
77% of Europeans insist EU funds be linked to respect for Rule of Law and democratic principles
In a new survey commissioned by the European Parliament and conducted at the beginning of October 2020, nearly eight out of ten participants (77%) across the EU support the concept that the EU should only provide funds to Member States if the national government implements the rule of law and democratic principles. At least seven in ten participants agree with this statement in 26 EU Member States.
An absolute majority of Europeans continues to call for a larger EU budget to fight COVID-19
54% of Europeans believe the EU should have greater financial means to be able to overcome the consequences of the Coronavirus pandemic. In 20 EU Member States, a majority of the participants agrees with this claim; in 14 EU Member States, an absolute majority of participants supports a larger EU budget.
Asked about which policy fields this enlarged EU budget should be spent on, more than half of participants (54%) say that public health should be a priority, followed by economic recovery and new opportunities for businesses (42%), climate change and environmental protection (37%) and employment and social affairs (35%).
At EU level, climate change and the environment has replaced employment in the top three spending priorities compared to the last survey conducted in June 2020.
Public health is the top spending priority for respondents in 18 countries. Estonia, Latvia and Czechia put the economic recovery on top, whilst in Austria, Denmark and Germany citizens favoured most the fight against climate change. In Croatia, Slovakia and Finland, participants chose employment and social affairs as their top spending priority.Broad majority of citizens fear direct impact on their personal financial situation
Taking the necessary decisions on the Recovery Package and the MFF as soon as possible is clearly vital, as demonstrated by the worrying personal financial situation of European citizens since the beginning of the pandemic.
A broad majority of citizens fear the pandemic will a direct impact on their personal financial situation – or have already suffered it: 39% of participants say that the COVID-19 crisis has already impacted their personal income, while a further 27% expect such an impact in the future.
Only 27% expect the COVID-19 situation not to have an impact on their personal income. In 20 countries, most participants say that the current crisis has already impacted their personal income.
Citizens continue to see the EU as part of the solution to this crisis
Two-thirds of participants (66%) agree that the EU should have more competences to deal with crises such as the Coronavirus pandemic. Only a quarter (25%) disagrees with this statement. These findings are consistent with the results from both previous surveys conducted by the European Parliament in April and June 2020 respectively.

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Governments must not accept damaging austerity cuts in response to COVID19 pandemic
by Isabel Ortiz and Richard Jolly
Inter Press Service
16 Oct. 2020
This week the world’s Ministers of Finance and Central Bank Governors meet virtually at the 2020 Annual Meetings of the International Monetary Fund and the World Bank and decide on the fate of the world.
This year’s gathering is particularly important, given that the world is confronting an unprecedented crisis. Governments are struggling to finance emergency care and urgent socioeconomic support to cope with the COVID19 pandemic.
While these short-term expenditures are necessary, countries need more than intensive care units, respirators, tests and emergency support. Governments must continue to invest in long-term public health, universal social protection floors, employment-generating activities and other sustainable development goals.
The funding gap remains vast. However, the budgetary capacity or fiscal space is more limited than before COVID19, as pandemic emergency spending has left governments with higher levels of debt and fiscal deficits.
Many countries received support from the IMF’s Rapid Financing Instruments and other arrangements, or obtained additional loans to cope with the COVID19 emergency, leaving them more indebted.
But now the IMF and world financial leaders are talking about “necessary” fiscal consolidation or austerity cuts after the pandemic.
Austerity cutbacks reduce economic activity and worsen living conditions. The pandemic has revealed the weak state of public health systems – generally overburdened, underfunded and understaffed because of earlier austerity policies and privatizations.
Over the last decade, a majority of countries have implemented austerity policies, resulting in negative social impacts. People have suffered inadequate social security reforms that reduced hard-earned benefits; pay cuts and redundancies for teachers, health staff and other civil servants; reductions to subsidies; labor flexibilization reforms that worsened working conditions; privatization of public services; and the targeting and scaling down of social protection benefits, when the world should be scaling up social protection floors.
More than 500 organizations and academics from all over the world have signed a statement requesting the IMF to end austerity.
“The IMF has already started locking countries into new long-term austerity-conditioned loan programs in the past few months” says the statement “… and a significant number of the IMF’s COVID-19 emergency financing packages contain language promoting fiscal consolidation in the recovery phase… Instead of austerity cuts, it is critical to create fiscal space and give governments the time, flexibility and support to achieve a sustainable, inclusive and just recovery.”
People are suffering unnecessarily. They were left behind prior to COVID19; they have been severely affected during the pandemic; and, if ministers of finance agree on austerity cuts, they will suffer from the sharp reductions in government expenditure.
In the 1980s and 1990s, structural adjustment and austerity became conditions for Latin America and Sub-Saharan Africa. The result? Between 1980 and 2000, Latin America had suffered two decades of economic stagnation. In Sub-Saharan Africa, per capita income fell 15 percent.
Poverty and inequality have both increased during the pandemic. Countries now must avoid austerity cuts at all costs, and instead boost social spending. A return to “normal” (pre-COVID19) is not the solution, many were denied a decent living. It is necessary to increase public expenditures and create jobs.
This is feasible. There are alternatives. There are at least eight options for that governments can consider to increase public budgets, instead of austerity.
First, increase tax revenues, in particular -given the growing levels of inequality- increasing progressive income and wealth taxation, corporate taxation including taxes to the financial sector that remains largely untaxed.
Second, increase social security coverage and revenue by bringing workers from the informal economy to the formal sector, thus paying social security contributions – and above all, not cutting employers contributions to social security as sometimes is suggested as this would make social security unsustainable.
Third, fight and claw back illicit financial flows. Substantial public funds are lost to illegal activities such as money laundering and tax evasion. Abating these flows will result in a significant increase in available public funds.
Fourth, if governments need to look at re-allocating public expenditures, austerity cuts to the social sector should be avoided at all costs. Instead, focus must be upon replacing high-cost low-social-impact expenditures such as defense. For example, Thailand have successfully cut military spending to invest in public health.
Fifth, adopt more accommodative macroeconomic frameworks, with some tolerance to inflation and fiscal deficits.
These could be supported by international measures.
Sixth, the IMF should explore reductions in sovereign debt. Given the current high debt levels, it is important to promote debt forgiveness/relief, or at least debt moratoria with restructuring.
Seventh, increases in development aid and transfers, such as the Global Fund for Social Protection Floors.
Eighth, issuing Special Drawing Rights at the international financial institutions, or alternatively issuing fiat money to developing countries via a multilateral consortium under the United Nations to provide liquidity to prevent a global depression.
These policy options are too important to people’s lives to be decided behind closed doors: they must be discussed openly in national dialogue, with all relevant stakeholders, including unions, employers, governments and civil organization.
Austerity can and must be prevented, it is feasible to increase social expenditures and generate jobs. Governments must not accept damaging austerity cuts.
Instead of cuts to budgets that have already been pared to the bone, countries can prevent austerity and have significantly larger budgets to fund employment generating economic activities, and bring health and prosperity to all citizens.
* Isabel Ortiz, Director of the Global Social Justice Program at the Initiative for Policy Dialogue at Columbia University, USA, was Director of the International Labor Organization and UNICEF, and a senior official at the United Nations and the Asian Development Bank. Richard Jolly is a leading development economist who was named one of the fifty key thinkers globally in this field of economics, Honorary Professor and Research Associate of the Institute of Development Studies (IDS) at the University of Sussex, UK, and a former Assistant Secretary-General of the UN.

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