EU panic: Brussels sends huge warning to member states in behind closed doors meeting

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A huge €1.1trillion euros from the EU’s 2021-27 budget and an additional €750 billion euros from the bloc’s first-ever joint borrowing is being used to help member states bounce back from the financial impacts inflicted by the pandemic. But the warning, shared with EU envoys at a behind-closed-door meeting on January 7, the content of which was described to Reuters by three diplomatic sources, is the latest blow the now 27-nation bloc faces with finding the most suitable way to spend large sums of money. National lockdowns have seen businesses in many countries shut for several months over the past year, while tens of millions of jobs have been lost as a result.

Governments have also been forced to spend several billions of euros in a desperate bid to help residents and keep their own ailing economies afloat.

But red tape and political wrangling threatens to undermine the aim of ensuring equal economic recovery to put EU countries on more even footing after the pandemic.

One EU diplomat, relaying criticism by the European Commission at the behind-closed-doors meeting, said: “The plans lack structural reforms, strategic vision, concrete targets, and cost-effectiveness.

“A lot of work remains to be done.”

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Another Brussels diplomat told Reuters the European Commission warned some of the plans were not concrete enough and lacked measurable targets.

A third insider said: “Most governments are good at spending money but not so good on reforms.

“They need to update these plans to take that on board.

“They have to work a lot to be able to absorb the money quickly and spend it on decent projects.”

The sources said the Commission did not say which countries had submitted the poorest plans.

The 27 EU member states must submit their final proposals to Brussels before the end of April.

They will then have to be endorsed by the other EU countries before the financial plan can be launched into action towards in the second half of this year.

But more than half of the 27 member states have so far not submitted their initial plans, and according to sources, the Commission has warned them to accelerate the process in order to avoid any delays that may be felt from disbursing the money.

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The third source, referring to wealthier member states that are particularly keen to avoid waste, told Reuters: “If these preliminary plans are not improved, if they are rubbish, they shouldn’t be accepted by the Commission.

“Even if they were, the net payers would block.”

On Monday, following a meeting with eurozone countries to discuss their national recovery plans, European Economic Commissioner Paolo Gentiloni, insisted “good progress” was being made but that there was a need to “increase the ambition of reforms”.

He also warned many draft plans need to be “strengthened” with more details on timings, targets and milestones added to ensure the huge sums of money are spent in the best way possible.

Eurozone finance ministers had met to try and decide how best to design and coordinate economic plans to recover from the coronavirus crisis, while the European Commission warned the global pandemic was widening.

Chairman of the ministers Paschal Donohoe said: “We will be reviewing the plan the European Union has to recover from the effects of COVID-19 and to do that in a way that is more inclusive and more beneficial for all.”

But the Commission said in a note prepared for the ministers at Monday’s meeting the pandemic is already pushing already highly indebted countries deeper into debt or increasing problems in areas like competitiveness or employment.

The risk of crises increases significantly when such big gaps exist between economies sharing the same currency, resulting in the single monetary policy of the European Central Bank becoming less effective.

But the Commission said reforms and investments funded by money from the EU should help solve those issues.

The Commission note said: “A strong implementation of relevant reforms and investments, while making full use of the EU support measures, should tackle the identified imbalances.

“Addressing imbalances going forward will be key to prevent the risk of accentuating divergences within the euro area.”

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