The 27 heads of EU Member States have approved a top-up of the European Union’s defence budget for the coming years and a substantial financial aid package for Ukraine, thereby preserving European unity in the face of Russia.
Emergency in Ukraine reshapes the art of compromise
The “We have a deal” from Charles Michel, the President of the European Council, was greeted with great relief.
The agreement, which was reached unanimously, unblocks aid that Ukraine had feared it would never receive. The €50 billion fund for Kyiv is an important part of the aid the war-torn country expects from its allies, at a time when its administration is no longer able to run the country, for instance to pay civil servants’ salaries.
The compromise reached by the 27 also led to an increase in the European budget, notably for the defence industry and the management of migration flows to Europe.
Symbolically, this agreement is proof that the European Union works through compromise, and that unity is resilient despite the pressure generated by the war in Ukraine. The fear of failure raised the threat of an internal political deadlock within the Union.
The division that has emerged in recent months between Hungarian Prime Minister Viktor Orbàn and the other 26 leaders highlighted the major rifts between this Member State and Kyiv’s staunchest supporters.
As evidence of the event’s major importance, the summit was described as a “showdown” by various media, including the Financial Times, Politico and Euractiv, before the curtain went up.
Convincing through compromise
If the extraordinary European Council on the 1st of February was considered by diplomats and politicians as the last chance, it was because the negotiations had been going on for several months. At the previous European Summit in December, the Hungarian leader from Budapest had already refused to approve the creation of a special €50 billion fund for Ukraine, and jeopardised the agreement on the Union’s total budget package.
The few weeks before the 1st of February saw intense negotiations and appeals from both sides, but also threats to the Hungarian economy, according to the Financial Times.
For its part, Budapest insisted on introducing a regular vote on the disbursement of aid to Ukraine. At the start of the negotiations, it was difficult for most other Member States to imagine introducing a monitoring mechanism of the aid and what they saw as a ‘right of veto’ offered to Hungary.
But the insistence of both parties forced all the Member States to seek a solution and a compromise satisfactory to all.
An EU26 only solution avoided
In the conclusions they eventually adopted, the 27 Heads of State and Government decided that “on the basis of the Commission annual report on the implementation of the Ukraine Facility, the European Council will hold a debate each year on the implementation of the Facility with a view to providing guidance,” without holding a vote on it.
A second “rendez-vous” clause is included. “If needed, in two years the European Council will invite the Commission to make a proposal for review in the context of the new [European budget]”. Any revision of the €50 billion would then require unanimity.
In exchange, Hungary obtained a reference to a European Union agreement which ensures that the conditionality mechanism for disbursing European funds to capitals unless there’s a breach in democratic values would treat all Member States equally.
“Some read this as a hint from EU member states to the European Commission to unfreeze some of the €10 billion held back from Hungary over rule-of-law concerns, or at least be more lenient with the strict milestones Budapest has to fulfill,” according to Euractiv.
Without an agreement on this text, the Member States would have had to create a mechanism with 26 Member States, without Budapest. This “Plan B” would have involved the 26 Member States sending aid to Ukraine outside the framework of the European Union. However, this system would have been “more cumbersome, and raised questions about the bloc’s ability to proceed with a united front”, writes Bloomberg.
This agreement was holding up the overall agreement on increasing the European budget, to which aid for Ukraine was linked. Negotiations on the Ukraine package were completed in the European Parliament the following week, on Monday the 6th of February, paving the way for disbursements in March.
Green light for the STEP platform
The agreement reached on the 1st of February also enabled the 27 to create the new STEP (Strategic Technologies For Europe Platform) sovereignty fund, which will receive €1.5 billion from the European Defence Fund (EDF). Here again, an agreement with the European Parliament was reached in a matter of hours on Tuesday the 7th of February.
The prospect of European elections is encouraging the co-legislators to reach an agreement quickly so that, after the usual legal procedures, it can be formally adopted by May and the funds disbursed as soon as possible.
Sources : POLITICO, BLOOMBERG, EURACTIV, FINANCIAL TIMES, EUROPEAN COUNCIL