Written by Ralf Drachenberg and Rebecca Torpey.
The main objective of the special European Council meeting on 1 February 2024 is to finalise EU leaders’ position on the revision of the multiannual financial framework (MFF). While the aim is to reach an agreement among all 27 Member States, alternatives could be used based on an agreement of 26 Member States. EU leaders may also use the meeting to raise other topics – notably, the war in Ukraine and the possible use of frozen Russian assets, next steps in the enlargement process, security and defence and external relations.
Revision of the MFF
On 1 February, EU leaders will discuss the revision of the MFF for the third time since the publication of the Commission proposal in June 2023 (after the regular European Council meeting of 26-27 October and the 14-15 December 2023 meeting).
Dividing lines between Member States
Discussions in the European Council on the EU budget are never easy. Issues that traditionally divide EU Member States include: i) the size of the EU budget; ii) the balance between policy areas; iii) the existence and size of rebates; and iv) the use of new own resources (see The role of the European Council in negotiating the 2021-27 MFF, EPRS). A core dividing line in the discussions on the revision of the MFF is the question of the balance between redeployments (i.e. shifting money from one priority to another) in the existing EU budget and the use of additional money.
Moreover, during EU budget discussions Member States are divided between net contributors (those that contribute more to the EU budget than the amount of EU funding they receive) and net beneficiaries, which is reflected geographically in a north vs south division. In fact, following the presentation of an updated ‘negotiating box’ by the President of the European Council, Charles Michel, at the December 2023 meeting, 26 EU leaders can support the proposal on the table, while one, Hungarian Prime Minister Viktor Orbán, cannot. The issue of disagreement between the Hungarian government and the other 26 Member States is the proposed support of €50 billion for Ukraine over the 2024-2027 period.
The current proposal envisages reinforcing new priorities with a total of €64.6 billion, of which €33 billion will be financed by loans and €10.6 billion by redeployments. In addition to the €50 billion for Ukraine, €2 billion would go to Migration and Border Management, €7.6 billion to Neighbourhood and the World, €1.5 billion to the European Defence Fund under the new STEP (Strategic Technologies for Europe Platform) instrument, €2 billion to the Flexibility Instrument and €1.5 billion to the Solidarity and Aid Reserve. These figures are significantly lower than the budget reinforcements requested by the Commission (€65.8 billion MFF top-up) and the European Parliament (€70.8 billion).
Possible results of the European Council on the revision of the long-term EU budget
As a revision of the budget would still need to go through the legislative process (i.e. co-decision) after a potential political agreement, time is very tight. Therefore, some kind of agreement is very likely at this special European Council meeting, either with the agreement of all 27 or of 26 Member States.
Plan A: An agreement at 27
EU leaders – for instance, German Chancellor Olaf Scholz, as well as Charles Michel – have expressed their confidence in the EU’s ability to reach an agreement among all 27 Member States. How costly such an agreement would be in terms of concessions to Hungary is less certain, and Member State representatives have discussed different possible compromises over the past few weeks. The Hungarian government initially asked for all frozen funds linked to its domestic rule-of-law concerns (around €20 billion) to be released. Currently, its main demand is to have an annual review of financial support for Ukraine. The majority of Member States are against a solution including annual reviews, as Ukraine would lack a long-term planning perspective, while giving Hungary, or any other Member State, an ‘annual veto’ opportunity. This view was reiterated by numerous MEPs in the plenary debate of 17 January 2024 on the preparation of the special European Council meeting. Many political groups and MEPs were very critical of the blocking of the MFF revision by Hungary, due to its stand on support for Ukraine; some were concerned about possible concessions giving in to Hungary’s demands.
One option being considered by the Commission is the introduction of an ’emergency brake’. Without providing a veto opportunity, it would enable one or more Member States, exceptionally, to request that the matter be referred to the next European Council meeting if they considered that there were serious deviations from the satisfactory fulfilment of the targets.
Plan B: An agreement at 26
Commission President Ursula von der Leyen stated after the December 2023 European Council meeting that the Commission would be preparing alternatives ‘to have an operational solution’, whatever the result of the special European Council meeting. One solution for the Ukraine Facility could be for 26 Member States to provide bilateral guarantees to support the loans and additional national contributions as external assigned revenue for the grants. Viktor Orbán has publicly stated that his preferred solution would be for the financial support for Ukraine to come from outside the EU budget.
Russia’s war against Ukraine
After Russia’s invasion of Ukraine, the EU froze billions of euros of Russian central bank reserves held in the EU. Further to a European Council request in December 2023, the Commission adopted a plan to register and hold the profits from these frozen assets. This may be a first step towards using those profits in support of Ukraine, in a way that is consistent with EU and international law. In a resolution adopted in November 2023, the European Parliament advocated seeking legal ways of confiscating frozen Russian assets and using them for the reconstruction of Ukraine and compensation for the victims of the war. In January 2024, finance ministers discussed the ongoing work on this delicate issue. Even if the February meeting will mainly focus on financial aid to Ukraine, EU leaders may also discuss this other potential source of funds to support Ukraine.
Security and defence
The European Council may take stock of the implementation of the Versailles Declaration, one of the three key dimensions of which was to bolster the EU’s defence capabilities towards building EU sovereignty and reducing dependencies. As the second annual report of the Strategic Compass is expected in the spring of 2024, EU leaders may also discuss progress in preparing that report. Likewise, EU leaders may discuss progress in developing the European defence industrial strategy, including a proposal for the related European defence investment programme, which the December European Council meeting had requested the High Representative and the Commission to present as soon as possible.
Since EU leaders may discuss EU security and defence as well as the capacity of the defence industry in Europe, they may consider the upcoming US presidential elections. Currently, the US is having difficulty reaching an agreement on a military aid package for Ukraine, due to a partisan dispute on US border migration. If former-President Donald Trump were to win a second term, Ukraine may have to rely even more on the EU and other European partners for military aid in the coming years.
External relations
Last December, EU leaders held a strategic discussion on the conflict in the Middle East, but were unable to agree on conclusions. EU leaders may return to the issue at the special European Council meeting amid a worsening situation in other parts of the region, such as the Red Sea and Lebanon. One element of the discussion could be the two-state solution, which the European Union has consistently supported, but which has been rejected by both the Israeli Prime Minister and a senior Hamas leader.
EU enlargement
EU leaders may follow up on their December 2023 discussion on EU enlargement, and consider the progress made by the Commission since their last meeting and the next steps in the process.
Read this ‘at a glance note’ on ‘Outlook for the special European Council meeting on 1 February 2024‘ in the Think Tank pages of the European Parliament.
