As part of N1's series "World in times of corona", foreign editor Ivana Dragicevic spoke with Jan Olbrycht, the European Parliament's standing Rapporteur on the Multiannual Financial Framework.

So we saw the Commission’s proposal. You said it’s not going to be easy, but you said also that it’s the turning point that changes the rules of the game in the European Union, so tell us at the beginning, why?

Thank you for the invitation and the possibility to share my views. I think that there are technical elements, which are maybe a little bit too complicated for all of us – I mean as citizens of Europe – and of course the general elements. Let me just start with the general. So I can just make some kind of illustration. Up to now, after the Lisbon Treaty, the European Union was organised, mainly based on the decision of Prime Ministers, and the European Council. It’s important that the Prime Ministers or Chancellor or President are friends, they meet now more often than before. And they, they meet to take all the basic decisions in a very specific way, because this is a unanimous decision, meaning everybody should say yes to have the decision. Very often the heads of governments are going to Brussels, and they of course agree to something, and then they go back home. And they say no, this is Brussels which decides. Now this is not true. According to the Lisbon Treaty, the decisions are made by them unanimously. And next, of course, the European Parliament has to translate it into legislation. And maybe we will do it together with the minister. So that’s why we will say this is our common decision, what we call a co-decision. So, this is the system of Lisbon Treaty. In fact, in this system, the European Commission is a kind of executive, someone who of course can propose formally, but next they are responsible to introduce everything, but in a new situation, the very specific conditions created by the coronavirus, they change approach. By the way, not many people know this, that the idea to find money, not in the national contributions, but to find it in the capital markets, or financial markets. The idea was not made by German and French presidency. It was made by the Commission. So the commission said, okay if you don’t want to give more money, because you have problems you have to pay industry, you have to save the hospitalisation, okay even if you don’t give more money to European Union, we have to find money. So we, the Commission, we propose to go to the financial markets and to borrow the money on your behalf, on behalf of the member states, so we can do it, and we will not do it through the banks, we will do it ourselves. So it means that the Commission will go to the market. The Commission will borrow the money and next, the Commission will decide how to distribute the money among the member states. So, what it really means is that we see that the role of Commission is becoming more important. What is very surprising – the first reaction to this was very cold by the governments. But suddenly the German and French government changed the strategy, and they in fact found that maybe this is the way to change general rules. So my private opinion is that the German government found that maybe this is the possibility to change the rules and of course, they decided to propose this very famous 500 billion. What is the consequence? The budget of European Union, will not be based on the contribution, but it will be reinforced by the man in power for the long-term. What it means that we will have to pay back. Who will pay back European Commission? Where is the money to pay it back? The money will come from the budget. The money in the budget comes from the national contribution, and the new own resources, which means that which we don’t like to call the European tax. It’s rather the income, which goes not to member states, but it will go directly to European Union. What is the change of rules? It’s that the European Union, after so many years of debating about all the resources… It was like, you know, looking at the horizon, we are going to the horizon and we will not get to it. But now, because of the coronavirus, the Commission said no, this is the moment. This is the moment to change.

Even before the coronavirus we were at some kind of a turning point for Europe on this discussion on our future. There was talk about whether there will be more or less Europe, to put it simply. And this kind of speeded up the moment. This was the moment for the conditions – when Europe was in a very weak state concerning its economy – to put forward this kind of proposal. And maybe it’s not just the question of money, it’s the question of the role of the EU, because we also saw a very ambitious programme of the Commission, it was very future-oriented before this recovery plan, and the proposition of the multi annual financial framework. So are we now, besides the money, talking about fundamentals, what kind of continent or what kind of union we will be? Because you said that the Commission itself is putting itself on the market borrowing the money, and the whole concept of this proposal needs our legal framework to be changed, and the Parliament will have important role in that.

You’re absolutely right, but let me remind you that this debate started in fact, just before Brexit. So that’s why we were trying to answer the question, what will be the EU, after Brexit? And of course this was the moment that one of the biggest payers was leaving. What will we do with the European Union, how will it behave? What about the enlargement, like for example the Balkans, what will be the future of EU? And everybody decided to start the debate, and to open this, let’s call it the Pandora box, but they in fact decided to use Brexit as the possibility to redefine or to reconstruct. But suddenly, the coronavirus came. So, this debate which has been planned to start immediately, it became urgent. Not only because of Brexit, but because of the new situation. This time, both crisis with Brexit and the crisis with the virus gave the possibility to open the new chapter, and to start immediately the debate. You know, some of the euroskeptics after Brexit said that the European Union is now is declining, and so on, which was not true. Brexit, in fact, reduced the anti-European approaches in Europe. Just to summarise, I think that these two crises, together, gave the possibility for change. And I think what we will face will be reinforcing the EU, because of the whole global situation.

So let’s debunk this myth of this really ambitious and huge, never-before-seen, amount of money that is being proposed in front of member states and in front of European citizens. So first we’ll talk about the recovery plan, this next generation, and then about the budget itself. A lot of leaders who let’s say gained more in this European Commission proposal ran to their states, the Polish Prime Minister as well as Croatian Prime Minister, and they announced it like “we won”. We got this €10 billion. So can you explain the procedure to our citizens because there, there is a lot of politicisation but not enough talking about the fundamentals of the procedure of this new recovery fund.

Yeah, I want to compare the position made by the Prime Minister of my country, and Prime Minister of Croatia, who I have known and I call him a very good friend of mine. Because we were working together and you know, and he knows Parliament very well, and he knows all the mechanisms so, when he’s saying that this is a victory he knows what he’s saying. But, but, but to just to explain. The question is how much money we will have at the end. We will have to add money, which has been planned, to the European budget. And you have to add the recovering fund. We are now debating just the funds, so nobody is now discussing the budget as such, but you have to look at it together. So when you have this situation of Poland and Croatia, you have to take two numbers. You have to take the planned number from the budget and the planned number from the fund. What it means is that even if the budget is reduced, the fund will give more possibilities. So in the end, there will be much more money than what everybody planned for before, but of course this money is not just given. Like the budget is for the long term policy, the recovery fund is for concrete elements which are linked to coronavirus crisis to save the economy, to save the enterprises, to help the people, to save jobs, and to of course to reinforce the health system. So that’s why it’s formally added, but it’s very well defined. There are conditions. So, the country can get the money from the fund, which comes from the financial markets, if this country first prepares its recovery plan. The recovery plan which will show how the money will be spent. Will it really be used for the coronavirus consequences. Secondly, what about the priorities of EU? Will they be fulfilled, or not? Like for example the question of European semester, which is a kind of guidelines given to the government, what should be done in the concrete member states to reform to change and so on. Secondly, what about the Green Deal? What about the change of energy? That will be the second condition. You have to have your plan for the Green Deal, for the reaction to climate change, etc. Third, it should be absolutely based on the digital economy. And fourth, it should be linked to the rule of law. So the money is not given. The very famous amount of money which has been presented by the Prime Minister is like the provisional allocation, it means that you can get it if the government agrees to the system. Let’s not forget it. So if the government agrees, you will have a chance to get it, if you fulfil the obligations.

There’s been a lot of talk on two elements of what we are facing and what are we going to be facing in this year in the years to come. One is debt neutralisation, which is in the core of EU debate, and the other is the rule of law, a political condition that’s been a huge obstacle in the debates before, especially for some members of the Visegrad Group, for Orban et cetera. So how do you think it will play out this June, at the European Council, and before that also at the European Parliament session?

Let’s start from the last element. I don’t expect the European Council to make quick decisions, especially when Merkel said that she doesn’t expect the decision in June, probably during the autumn. But let’s not forget that the first of July will be the start of the German presidency, and they end of the Croatian presidency. Secondly, let’s just explain the mutualisation of the debt. This is a question of if we take the credit, who will take the credit? And who will pay it back? Who’s responsible for this credit? If it’s taken by the member states, the member states are responsible. If it’s taken by European Union, European Union is responsible. So if the money is not correctly spent by one country, it should be paid back by everybody. Everybody is responsible. So this is that very famous mutualisation of the debt. By the way, the economists they say that the United States in fact became a real Federation after mutualisation of the debt, so the debt of each state has become the debt of the whole United States. So I think this is a very important step towards the stronger European Union. The second element was the rule of law. The rule of law of course is a political problem, but it’s not the political in terms of making policy. This is about the rules. If the house is constructed on concrete principles and rules, the question is if everybody keeps the same rules. If we don’t keep the same rules, the system is in danger. I mean not a concrete country, the whole system is in danger. For example, let’s agree that we are driving on the right side of the road and now someone is starting to drive on the left side. What about what about the danger? Is it dangerous for him, or for everybody? No, it’s for everybody. So changing the rules can happen in every country. Don’t be naïve. It’s not the problem of one or two countries, especially centuries in Europe, it can happen everywhere. So, as we know it can happen everywhere, probably this is the way to use all the possible means to reduce the danger. Okay, we can use transfers of money, and to make the conditions, but because, and I don’t want to go into details, but the concept is, if there is no respecting the rule of law, which is the common understanding, it’s dangerous for the investment. For example if the judges are not independent. In the problem of conflict between the investors, it’s a real danger for European money. This is dangerous for European investment, for European money. So that’s why the rule of law is not the simple reaction, a political one. No, the rule of law means that you can have the concrete organisational solution, whatever you want. You can have your own system of the Constitutional Court, but you have to keep the rules, because if you don’t keep the rules, it becomes dangerous for money, dangerous for funds.

Before this, we didn’t have strong mechanism to force the members of the EU voluntarily agreed by joining the EU to respect these rules, these fundamentals of the European Union. And now we have governments, from Polish to Hungarian – we’ve witnessed for several years what’s been going on. I would like to talk about Orban. Of course you’re an EPP member but we know what happened within your party group. And now, we also know that there were great beneficiaries of these European funds so how do you think this will change after these new proposed conditions for this money?

But we have to understand that it’s like with Brexit. I mean, nobody thought that it would happen that someone will try to leave. Even in the treaty, Article 50 is very limited because practically, they didn’t develop the whole situation so nobody thought some years ago that it can happen, that in some member states they were real changes, and changing the rule of law or breaking the rule of law was taking place. So, that’s why I think the situation is completely new. And it was not predicted but at the same time, we have a growing tension in some of the rich member states, where some ask how long will we give our money to these countries if they don’t respect the same rules? This is the tension which is growing, but not very often seen by the others. But let’s imagine in my country, let’s imagine that one day we will be rich. Let’s imagine that we will be one of the richest countries in Europe and, one day, in one of the Western countries, something happens, which will frighten us in terms of the rule of law and democracy, independent judges etc. And we will be absolutely open to say, okay, do whatever you want. But, if we paid much more money than the others because we are rich, we will say, no, sorry, but this is our money. So I think this is the whole situation, what will be the reaction, in the long term, I think there will be a tendency to go to the mainstream, because the member states, of course, some of the member states are trying to change the rules. And of course, not to leave the European Union, but to change the rules. There are some parties in Western Europe. who don’t want to leave Europe, they want to change the EU. And I think this is very important. I think that there will be a mechanism between the rule of law and money. How it will be done, we’ll see. Of course it will not be very strong, but I think that it will, I hope, motivate some governments to change their behaviour.

You mentioned the so-called frugal countries. We saw the first reaction of Austrian Chancellor, Sebastian Kurtz towards the proposal that the Commission put out. Their biggest fear is what we talked about, this debt mutualisation. But in a way, the Commission tried to explain that it will not be like that. From your perspective – because you were the one responsible in the parliament to go through it – how do you see this?

It will not be easy because the frugal countries are not new which happened now. This group of member states has been active, for some years. Why? Because, first, they presented the view if the UK leaves the European Union, the European Union should reduce the budget and should reduce, of course, the policies. Which ones? Of course not the ones necessary now like the cohesion policy or agriculture, the European Union should first reduce and next to concentrate on the most innovative digitalization so this was the first approach. So it was not by chance. Next, they said, we will not give more money for the European budget, because, as I said, we don’t think that it’s necessary to keep the same level without one of the biggest payers. So they were to reduce budget. Next, when there was the debate about the Euro bonds, you remember some weeks ago, they were against the idea, not only them but also some of the Western countries. Why? Because they said this was the mutualisation of debt, and we will become responsible for the problems of those who are not spending money correctly. The next step for the frugal countries was when there was a discussion on whether there will be credits, loans, for the member states, or grants, which you don’t have to reimburse. So the frugal states said that if the member states want money, it should be credit, or loans and not money which is given. So I think this approach is not something which happens because they don’t like it. No, no, they keep the same position. We should have probably less activity, be more concentrated, less money paid, but I cannot exclude that they will be more open to the new fund. I’m sure, for them, the conditions to get the money will be much more important than the actual money is. So the frugal states will be now very active in saying that if you want to take part in the whole debate, but you have to complete the obligations. What about the activity concerning climate change, energy production, digitalization, rule of law? So we will see what the progress will be. They will not resign. No, this is not temporary, they are quite strong. And of course, we have to remember. I am a politician in this country and the politicians in the government know what the people who vote for them think. And I think this is very important. They have to take into account the reaction of the people in Austria, the Netherlands, Finland, Sweden, what the people think about Europe, about money, about behaviour of the other countries. So I think that they will be quite tough. That’s why the whole situation will not be easy, but I think there is a green light that they will be more open to the new funds, but with conditions.

But they’re also, as these politicians are being elected, the creators of public opinion and that public opinion can change. Talking about these conditions and the fears that frugal states have – we also have it in Croatia, but in some other countries we had corruption scandals, we have a very low percentage of basically withdrawing all the money that was on our disposal from the EU funds, but this amount of money opens also both possibilities. Some countries are not able, or they don’t have enough capacities or have large bureaucracies to draw that money or are not, maybe, innovative enough to look so far into the future, or, it can end up in some corruption channels. What can be done to try and avoid all of these scenarios?

For some countries like mine and yours, the amount of money is very big. The question is how it will be spent. If we expect that everything will be supervised by the European Commission – this is impossible. People are complaining about the European bureaucracy et cetera. But can you imagine that the European Commission is able to check everything? It is quite normal that the people in the administration multiply the rules to save themselves. What is really important is the tendency now, from the European level, to put the conditions, guidelines, to change the system in the country. Because it can be done only by the country itself. So the governments, the administrations, should take care of everything which is going on in the country, and take responsibility. Because, of course, in the end this is a big statistic in the hand of the European Commission, but we cannot imagine that the Commission will go into every detail. Everything is based on trust and control. Trust, but with clear rules and principles. It is very difficult to create the same rules for 27 countries. Because they became very formal. That’s why the people are complaining about Brussels. But for 27 countries, you can either have very general rules, which doesn’t solve the problem, or to make it as detailed as possible. But I think this is our problem, our countries are responsible for spending money and controlling the correctness and we must take responsibility for this.

The time for the budget was running out even before the virus, and now we have all of these procedures. First we have to wait for the European Council where we will have the final deal between the states, or not. Something the European Parliament is very careful about – and you talked about this a lot – is that beside the agreement on MFF on the rescue fund, we need to have some kind of a contingency plan. So, for our viewers, our taxpayers, our citizens, can you explain what the procedure is that needs to be done by the end of this year to have our next budget and the new fund?

We have to remember that the EU has a very specific way of preparing the budget. We have a one-year budget like in all member states, regions and so on. But, next we agree for seven budgets. Now, we are in the last budget from the 2014-2020 MFF. We are in the last year. So the next period of seven years will start in January 2021. To start on time, we need a budget, and we need clear legislation – it is important for the people in municipalities, in Croatia for example, how the money can be spent, who can get money etc. IT should be ready before January 1st. The question is whether it will be ready or not. We are now in a very difficult moment because we don’t have the final decision on the budget yet, so we will have to do everything on the legislation during the last months of the year That’s why the Parliament said that if, by chance, there is no agreement between the member states – and we have to remember that the budget, this is what we started with, should be accepted unanimously by all the prime ministers. So, first they have to decide, and next the European Parliament should say yes or no, and next we have the legislation. About 40 different new legislations which should be ready. The national parliaments only have to approve the fund. The budget is different, the fund is different. So, the budget itself – what we call the multi annual financial framework – should be ready before the end of 2020, and we are doing everything to do it. But if it’s not ready, if there is no agreement between the member states or no agreement in the Parliament, the Parliament says we should have a plan B. A special plan for one year, for 2021. This is our approach. If, by chance, we don’t finish, we have to have the plan B. But you asked me about the agenda, the calendar. We are now in June. So, first, the proposal of the Commission is to change the last year of this seven-year period, to change it immediately. So, to add some money, not to wait for the first of January, change it now. And to add about €11 billion to the budget. What that means is that the Prime Ministers should say yes and get more money. We will see if they do it in June. This is the change of now for the multi annual financial framework and we will have to say yes for this. This is one. Secondly, we need the agreement of the governments for the new system, meaning budget plus recovery fund. If the prime ministers decide to say, yes, they will probably have to go to the national parliaments, and to have the decision of the national parliaments to ratify the system for funds. Not for budget, for funds. If it’s ready, they will have to have the agreement with the parliament, on the all the legislation, and we will be able to start first of January, 2021. But, that is a lot of work to do to be ready on the first of January 2021.

Mr Hahn, the EU budget Commissioner, gave an interview to Financial Times. There’s been a lot of talk about this taxation, as he said, and he called upon the member states to back this new tax, which will include some kind of levy on 70,000 biggest companies that benefit from our European single market. There’s been a big discussion all around Europe about this kind of taxation so what’s your stance towards that?

I can give you only my private opinion because we didn’t have time in the parliament to discuss it. For me this is very clear proof that this is the next step. So, the Commission said that the theoretical debate about the new old resources of EU, is over. Now, let’s do it practically. Let’s create a new inroad on resources. If we don’t do it, we will not able to pay back what we borrow in the financial markets. It will be a real problem, because if we borrow €750 billion, we will have to pay it back. If we don’t have the new resources for EU, the member states will have to pay a lot to the European budget and we don’t expect it’s possible. As you remember, some months ago there was a debate about plastic. Some months ago it was transactional tax, financial transaction tax. Next, there was a debate about the emissions. So to use the money from the emissions. But now, one of the proposals which was going around was how to tax or to charge or to make the levy for the biggest internet companies. But, the biggest internet companies will be immediately an American problem. So, I’m trying to understand the idea of Commissioner Hahn. It’s that probably we’ll have to find a way to create a levy on all big enterprises, all the biggest for the participation on the single market. This is a very clear sign for our discussion. As I said, the first stage of the game is over. So we have to create the resources because if not we will not manage, and the coronavirus is creating the new challenges. So let’s now be concrete. Let’s take to the discussion concrete proposals. One of them is presented by the Financial Times. We are always quite surprised when the Commission first presents something to the Financial Times or to Politico or some other media, and next goes to the parliament; maybe it’s because of the coronavirus. But, of course, it creates a lot of debate. What is good, is that we are becoming more and more concrete. The question is what will be the reaction of the economic world, but we’ll see. But this is not by chance, as you know, you just start the debate you provoke the reaction. And next time you try to find a way. My point of view, if we don’t create the resources, we will not manage, this is absolutely clear. So, he will not manage to have this fund. So, if the Prime Ministers, like the Prime Minister of your country, say this is a victory that we have the chance to get the money, it means that we hope that this system will be approved.

And just for the end, talking about our future – you’ve mentioned this, a little bit cynically, about how the Commission presents its ideas first to the Financial Times or Politico. We had a huge debate on democracy on our continent on the importance of European Parliament, on inequalities in Europe that kind of evoked the debates, or conference on the future of Europe, that also needs to start this year, I think. So how important is it to have now this debate about inequalities within Europe, and our future? Looking also at this kind of a budget proposal.

When we say conference of Europe, we have to explain. This is not the meeting, this is two years of different debates, meetings, seminars, etc. And there are different functions of the meetings. For some of the meetings, like for example among the experts, the question is what is the possibility to change the decision making process in EU? This discussion among the politicians is can we find the compromise, but discussion with the people is where the people are asked what they think, as normal citizens, about Europe. What do you think that should be changed? Which is important for politicians because maybe the people don’t have the information. Maybe they don’t have enough information, maybe it’s not very clear for them, maybe they think it’s still Brussels. So, in fact, this debate is the possibility to first to ask the people what they think that Europe should do, because what if the people say Europe should defend us against the pandemic, but at the same time the Prime Ministers, some years ago, refused to work on health system together. So maybe this is the time to change it. Maybe if the people want the EU to protect our borders, but at the same time they say okay but we don’t want you to intervene on some concrete elements. So, I think the conference on the future of Europe will have different elements, and it will be not only for experts, not only for politicians, it should be for the people, for the business. Trying to find the points that people don’t like, the ones they want to change. Or maybe they don’t know. I think that’s why it’s two years, because for a politician it’s important to take it seriously. I’m a sociologist by profession, we know very well, as sociologists – even though I’m not doing my job – but you cannot ask the people what they think, and next not to react. If you ask someone what do you think, what should be changed, you have to react. Because if not, the frustration will grow. So I think this is my hope: the conference on the future of Europe will have the possibility to ask, to find a way, to change the rules. This is absolutely urgent, but it will be very serious and it will be a real opening for change, and not the symbolic elements of discussion. So I hope it will be the case, because we have no choice.