Funding Unity in the EU

The union’s next budget and pandemic recovery fund could heal Europe’s divides—or make them worse.

A European Union flag flutters in front of a newly hung banner that reads “Coronavirus Global Response” in front of the European Commission building in Brussels on May 6.
A European Union flag flutters in front of a newly hung banner that reads “Coronavirus Global Response” in front of the European Commission building in Brussels on May 6. Kenzo Tribouillard/AFP/Getty Images

This week marks the middle of July, and the clock is ticking for Europe’s political leaders. By the end of this month, they are determined to agree to the European Union budget for the next seven years along with a recovery fund to respond to the COVID-19 pandemic. A special European Council meeting has been called for July 17 and 18, with capitals, instead of winding down for the summer, engaging in shuttle diplomacy, in the hope of finding some consensus for a deal. Representatives have also aired the possibility of a second meeting later this month. Some committed heads of state are even postponing their wedding plans in order to work on the agreement.

The stakes are high. In the EU, Council President Charles Michel’s latest proposal is a budget of just over 1.1 trillion euros ($1.25 trillion) over seven years. He also wants to empower the European Commission to borrow up to 750 billion euros ($860 billion) for the pandemic recovery fund. But there remain a number of sticking points. Chief among them is the government of the Netherlands’ firmly held view that any decisions about the recovery fund have to made unanimously. There’s also the difficulty of ensuring that taxpayers’ money goes toward a green recovery for a rules-based Europe while states such as Hungary and Poland are dragging their feet on both the transition away from carbon and respecting European values. With these countries set to do relatively well in terms of the allocations of the recovery fund, commentators have voiced concerns about how they can be convinced to play ball.

In short, coming to an agreement at this week’s special European Council is going to be far from easy. This is especially true in light of a survey commissioned by the European Council on Foreign Relations (ECFR) in late spring, which found significant differences in national positions about how the recovery should be handled.

In the survey of 11,000 people covering nine EU member states that together account for two-thirds of the EU population and GDP, which I worked on, there was large support for financial burden-sharing in countries that would likely be net beneficiaries of a recovery fund, such as Spain and Italy. There was no such appetite, or majority, in net contributor states. Even in France, which has been trying to bridge the divide between the union’s donor north and recipient south, only 47 percent of respondents support financial burden-sharing. In Germany, this number fell to 43 percent. In Sweden and Denmark, the figures were 30 percent and 24 percent, respectively.

If European leaders mishandle this moment and allow the union’s south and north to drift apart, the consequences could be dire. ECFR’s survey data shows clearly that the diversity in experience of the coronavirus crisis is driving differences of opinion across the EU. The impact of lagging EU support for Italy at the beginning of the crisis is well documented, and the ECFR’s research underlines this. In our data, 58 percent of Italians report their perceptions of the EU had worsened during the crisis.

Meanwhile, in Spain (which has been a persistently strong Europhile state in Eurobarometer surveys) and France, there are worrying levels of disappointment with the EU, at 50 percent and 41 percent respectively. The growing sense of disillusionment with the EU seen in Italian politics in recent years may be a harbinger of things to come in the rest of Southern Europe, especially if voters are dissatisfied with the EU’s plans for a recovery after the pandemic. Skepticism of the EU may also allow external actors to step in and exploit the growing drift. China’s mask diplomacy, for example, has been largely concentrated on the EU’s periphery, where Beijing is portraying itself less as a systemic rival and more as an alternative to European support.

But the good news for the EU diplomats putting in the hours at this week’s council meeting is that the European public does see a clear role for European cooperation. Now, as the first wave of the health crisis is receding in Europe, it is clear that the experience sensitized European voters to the need to be prepared for the next crisis. The ECFR survey shows that support for more efforts to tackle climate change has grown everywhere—as much as 61 percent of the population in the United Kingdom and 60 percent in Spain say they are now more supportive of climate efforts—with those who have grown more supportive outstripping those who are less so in every country covered.

Europeans are likewise strongly in favor of a European Union that will shape the post-pandemic international order; 63 percent of Europeans believe the crisis has shown the need for more European cooperation, and when asked how Europe should change after the crisis, the most frequent answer, at 52 percent of respondents, was that the EU should provide a more coordinated response to global threats and challenges. The EU, many believed, should also do more to keep its own population safe. In Germany and France, in particular, there were strong reported increases in support for business being encouraged to bring production back to Europe: over 50 percent in both for medical supplies, and around 40 percent for non-medical supplies.

Europe’s leaders have an opportunity to build a Europe that protects—economically and physically—its citizens and that has an influential voice on the international stage. But to bring European voters along with this project, they need to ensure that the recovery deal doesn’t focus on the abstract idea of solidarity but on ensuring an EU budget and recovery fund that support practical projects.

Europe’s governments should also look at investment protections for pharmaceuticals, medical equipment, and other key industries as a means of strengthening the bloc’s economic position. They could add further parts of the health sector to investment screening, going beyond biotech. In a world of fierce U.S.-Chinese competition, Europe should put its weight behind international institutions to reinforce a level playing field. The EU could position itself as the convening platform for actors, such as the World Health Organization, the G-7, the G-20, foundations, and the pharmaceutical industry.

Despite the complexity of budget deal that the European Council has to make this month, Europe’s political leaders should know that this is not the moment to turn inward and focus on technical, institutional questions. The steady rise in populism in Europe, the beginnings of which can be traced to the EU’s long and tortuous response to 2008 financial crisis, should teach them that. This time Europeans want to see the practical ways in which the EU can help shape their future for the better. The budget for the next seven years has to set the course for that.

Susi Dennison is a senior fellow and director of the European Power program at the European Council on Foreign Relations.