Ruttes brake: for example, the Netherlands can stop subsidies to other countries

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The agreement on the European budget for the coming years and the rescue fund is, according to Prime Minister Mark Rutte, a ‘good package’. The Dutch interests are ‘secured’, according to the prime minister. “It took a while, but I’m glad it worked,” he said after 90 hours of meetings in Brussels.

He admitted that it has been hit with the occasional punch, but “we are all professionals who can take a beating”. If you meet together for so long, irritation is also part of it, says Rutte.

Requirement from the Netherlands

The Dutch requirements have undoubtedly contributed to those irritations. Rutte wanted the corona help not to become a subsidy. And if so, strict requirements had to be imposed.

The first goal has not been achieved, the second has. Of the EUR 750 billion in emergency support for countries severely affected by the corona virus, EUR 390 billion will go to various grants. EUR 360 billion is in the form of loans. A Member State may borrow a maximum of 6.8 percent of gross national income.

The harder you hit, the more support

The recovery fund contains 312.5 billion in subsidies, 70 percent of which will be allocated in the years 2021 and 2022. The remaining 93.75 billion will be distributed in 2023.

The amount of subsidy a country receives for the first two years is determined on the basis of per capita income and unemployment. By 2023, unemployment will no longer be looked at, but the contraction of a country’s economy in 2020. That way, the idea is that the aid will be distributed fairly.

Member States guarantee

The European Commission is going to borrow the money, from now until the end of 2026. The Commission does this on behalf of the member states, which therefore guarantee it. If the Commission cannot repay the money, taxpayers of the Member States will pay for it.

Because the Netherlands is less severely affected by the corona crisis, the help that the Netherlands can ask for is lower than the amount that the Netherlands guarantees. The Netherlands is therefore a so-called net payer.

Housekeeping book out of order

According to Rutte and Finance Minister Wopke Hoekstra, some economies have been hit harder than others, also because Southern European countries did not have their housekeeping records in order before the crisis.

The Netherlands would therefore like to help, but the countries must do their best to deal with the next crisis themselves. “That is in our and the European interest,” said Rutte.

Recovery plan needed

Before receiving aid, countries must submit a recovery plan to the Commission for the years 2021 to 2023. The Commission assesses the plans within two months of submission. The plans must score well in terms of growth, extra jobs and resilience to emerge from the crisis. Attention to greening and digitization are also conditions for getting the green light.

The 27 Member States then have to give their approval, based on the Commission’s assessment. That works by qualified majority, with 15 of the 27 Member States agreeing and countries representing 65% of the EU population. The goal is to make a decision about this within four weeks.

Commission approves application

Whether the entire amount applied for is paid depends on the achievement of interim goals that have been agreed. That will be monitored by the Economic and Financial Commission, an advisory body comprising officials from Member States and central banks, supplemented by officials from the European Commission and the European Central Bank (ECB). This committee checks whether countries are meeting the interim targets attached to the aid.

And this is where Prime Minister Rutte’s handbrake comes into the picture. If – in exceptional circumstances – a Member State finds that a country is not complying with the conditions, it can bring this up to Charles Michel, the President of the European Council. He will then put this on the agenda for the next Euro Summit.

The right of veto in the Netherlands

Until the Euro Summit has taken place, the European Commission will not decide on the billions of euros aid and therefore nothing will be transferred. This is only allowed after the ‘EU’ leaders have discussed it ‘thoroughly’ and they have agreed.

“Ultimately, there must be a unanimous decision in the European Council, so you can stop that payment,” explains Rutte. In order not to let countries ‘simmer’ for too long, the aim is to negotiate for a maximum of three months. Rutte does not hesitate: “If it has to take longer, it will take longer.”

The aforementioned committee then reviews the application again. If the Netherlands is not satisfied, for example, the issue can be sent to the European Council again. In theory, a request for help can be sent endlessly.

But that will not happen, Rutte expects. If a country is “unreasonable” in its criticism, the European Commission may decide to approve the application outside of government leaders.

Paper tiger

Rutte expects the Netherlands not to have to use the emergency brake. “My goal is not to pull the emergency brake, but to get those reforms to happen,” he says.

On the Dutch side, the emergency brake is compared with the principle of the veto in the European Council. A country does not use its veto power every week, but the fact that this option exists forces countries to listen to each other and make agreements.



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https://www.rtlnieuws.nl/economie/artikel/5172590/ruttes-noodrem-subsidies-stopzetten-nederland-voorwaarden

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