Charles Michel plots ‘miracle’ EU budget deal
For European Council President Charles Michel, the extraordinary EU budget summit that begins Thursday is like the U.S. TV game show “Let’s Make a Deal” — he could walk away with a giant prize, or end up holding a goat on a leash.
Michel, a former prime minister of Belgium, is facing this trial-by-fire not even three months after taking office, and the outcome undoubtedly will set the tone for the balance of his presidency.
An agreement this weekend — largely viewed as a long-shot by veteran EU officials and diplomats — would be a breathtaking coup. Even getting close enough to seal a deal at a summit next month would be viewed largely as a success.
But an angry breakdown, always possible given the many conflicting priorities and contradictory demands of the EU’s 27 member countries, would not only deliver a heavy blow to Michel’s personal credibility, but could also destroy the unity that EU leaders’ strived to maintain throughout the Brexit process, just as trade talks with the U.K. enter a critical phase.
Brokering the EU’s long-term budget — the seven-year Multiannual Financial Framework (MFF) — typically takes at least two extraordinary leaders’ summits.”If Michel can do it in one, he’s a miracle worker,” one EU diplomat said.
In that sense, Michel may benefit from collective low — or merely realistic — expectations. As yet, no one has seen him walk on water. And so no one is holding their breath.
Michel has tried to lay the ground for fruitful negotiations by engaging in a marathon series of meetings with individual EU leaders and their top advisers, seeking to identify their top goals and any red lines that, if crossed, could detonate a package before the components are even fully in place.
The Michel method, revealed
The high-stakes process, under the bright lights of an all EU soap opera, has opened up a window on the “Michel method” — how the 44-year-old liberal, during five years as prime minister, handled the excruciatingly complex coalition politics of Belgium, a country which seems only by some accident of history to have ended up in Western Europe instead of the Western Balkans.
When confronted with seemingly impossible Belgian budget problems, Michel asked every party for their wish list and held a blizzard of bilateral talks (sound familiar?) to ascertain the different sensitivities and chart a course to a compromise. In these bilateral meetings, he pushed hardest on the most essential issues for which consensus needed to be reached, and equally important, on the positions from which each faction would never budge.
Only when Michel felt that he understood the position of everyone around the table and could envision the ultimate compromise, at least in his own mind, would he then call on parties to meet and try to push through a deal.
Those negotiations almost always went into the night and were sometimes held in out-of-the-way locations, such as Château of Val-Duchesse, a government mansion in a leafy part of Brussels, where Michel, while prime minister, occasionally invited European leaders for informal dinners.
As prime minister, Michel almost always succeeded in pushing through an agreement, demonstrating an innate knack for deal making that earned him the nickname “miracle prime minister.”
When Michel succeeded, early in his term, to win passage of a controversial fiscal reform, coalition partners praised his patience, his discretion and his ability to find a solution when others gave up.
Michel appears to be trying to replicate this method in his new job, but the EU budget talks are an entirely different ballgame.
To start, all of the participants in the Belgian budget talks had a crucial stake in reaching a deal. The EU budget, by contrast, is of relatively minor concern to many EU countries — especially the bloc’s wealthiest members. They could easily let negotiations drag out and, for their countries, life would largely continue as normal.
For security purposes, Michel has no choice but to hold the summit at the Council headquarters in Brussels, so he cannot use a more tranquil, secluded locale to set the mood for compromise and concession.
Still, when he sent his invitation letter to the extraordinary summit, he made clear he would try to use some of his old tactics, especially his control of the clock and the calendar. Michel noted that the summit would begin on Thursday but pointedly gave no indication of when it would end. His aides insist that he is fully prepared to keep leaders talking until an accord is in hand.
Suicide mission or political magic act?
Some skeptics in Brussels said such an ultimatum was tantamount to political suicide — even if Michel was mainly trying to demonstrate his own resolve. The skeptics noted that no one — let alone a Council president — is going to tell German Chancellor Angela Merkel when she can or cannot leave a room.
But if embracing such a make-or-break summit seems like a suicide mission, it’s an accusation Michel has faced before.
In Belgium, Michel was initially branded as leading a “kamikaze” government, because his party was the only French-speaking one in the federal government, meaning that as a Walloon politician he led a government that didn’t hold a majority on the Walloon side of Belgium.
Also, the Flemish nationalists had joined the federal government for the first time, even though Michel had vetoed working together with them before the elections, making the Walloon resistance to his government extra fierce.
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The EU talks are of an altogether different dimension — and not just because of the complexity in trying to satisfy 27 member countries, while also placating the Commission and the European Parliament. Some of those member countries are wealthy net contributors to the budget, who must demonstrate to their taxpayers that they are not being exploited for the benefit of others. Others are net recipients of EU budget money, for whom funds from Brussels are critical to political survival.
In a sign of the obstacles Michel now faces, Merkel told reporters in Berlin on Wednesday that she was not optimistic, based on the Council president’s compromise proposal.
“We think our concerns are not sufficiently addressed on many points,” Merkel said, appearing at a press conference with Finnish Prime Minister Sanna Marin, the leader of another net payer country. “And I therefore see very tough and difficult negotiations ahead.”
Merkel’s role should not be underestimated. The EU’s wallet is largely filled with German money — projected to be roughly one-quarter of all national contributions to the new budget.
Perhaps the biggest wildcard factor at the upcoming summit is French President Emmanuel Macron, who has made public statements declaring that the EU should be more ambitious, suggesting the bloc needs a substantially bigger budget, while simultaneously refusing to say how much more, if anything, France itself would be willing to pay.
“We have never expressed a magic number on this budget,” an Elysée official told reporters on Wednesday. “And we won’t.”
Speaking Macron’s language
Macron has made a habit of waiting to speak last at Council summits, and then throwing large wrenches into everyone’s plans, as he did when he opposed a long extension of the Brexit deadline last year, defying a proposal by former Council President Donald Tusk, and again this fall when he led an effort to block the start of accession talks with Albania and North Macedonia.
“We know that the positions are harder to reconcile this time around than the last time,” the Elysée official said, noting that the U.K.’s departure had left a big hole in the budget (estimated at €75 billion over seven years).
“We will put all this in the shaker, and I can’t tell you what taste the cocktail will have, whether it will be drinkable in one go, but it’s the objective and it won’t be easier to reach an agreement in three months. It would be a good collective signal to send by reaching an agreement now and being able to work on other issues moving forward, like the future relationship with the U.K.”
The official added, “We are ready to make compromises to reach a deal quickly instead of having multiple summits that drag on with complicated battles for the next few months.”
If France is eager for a quick deal, diplomats from several EU countries said that might be because Michel’s formal proposal, the so-called “negotiating box” that he unveiled last week, heavily favors French interests.
That proposal, while including many elements intended to address the top priorities of individual leaders, has revived suspicions that Michel is “Macron’s man” in Brussels — a liberal Francophone agent, who even follows the French president in his fashion choices.
Among the key points in Michel’s proposal was a prioritizing of money for the EU’s Common Agricultural Policy (CAP), over so-called cohesion funds for regional development. The blueprint also calls for assessing several proposals favored by Paris but not feasible in time for the current budget’s start date — such as a digital services tax and financial transaction tax — over the coming years. French officials have nevertheless complained that there is still not enough money for CAP in Michel’s plan.
Some EU diplomats said they believed former European Commission President Jean-Claude Juncker and his team had erred, and made life harder for Michel, by proposing too large an EU budget, setting unrealistic expectations that now cannot be met. They say the Commission blueprint has inflamed some voices in Brussels, particularly in the European Parliament, which has threatened to veto the budget, saying Michel’s proposal is far too small.
Many senior officials believe the key to a deal will be in the so-called “rebates” granted to net payer countries that reduce their overall bottom-line contributions to the EU budget. It is an ironic development given that the concept of rebates originated with the U.K., which has now quit the EU.
Still, several diplomats and officials noted that there was now far less opposition to Michel’s proposal of a budget amounting to 1.074 percent of the EU’s combined gross national income, more than the traditional benchmark of 1 percent.
Instead, the officials said, focus has shifted to how much money the net payers will get back through the rebate mechanisms, and the extent to which the rebates will be phased out over time.
(The Netherlands, notably, has maintained its strong stance against any increase above the 1 percent threshold, indicating that the fight about the overall budget size is far from finished.)
Officials close to Michel said they still believed a deal could come together this weekend, despite a lot of griping about the Council proposal and mounting pessimism that an accord can be reached in one go.
Johan Van Overtveldt, a member of Belgium’s New Flemish Alliance party who chairs the European Parliament’s budgets committee and previously served as Michel’s finance minister, said it would be “very hard” to reach a deal at this first summit.
Nevertheless, Van Overtveldt said: “Don’t underestimate Charles Michel’s negotiating skills — he really has them. He also has the patience.”
A senior EU official said there were undeniable obstacles to an agreement. “Everyone has something against the current proposal,” the senior official conceded. But the official said Michel had not heard anything in his one-on-one meetings that suggested a deal was impossible.
“He did not hear any signal from anyone that they are coming with an expectation that it won’t succeed,” the official said. “It’s a matter of dynamics. It’s also a matter of leadership, not authority.”
Most European Council members have never gone through the MFF negotiating process, which some officials liken to a four-dimensional chess tournament with at least 30 games underway at the same time. For leaders wondering what to expect, Belgium’s recent history may hold some important clues.
Three-card monte, Belgian style
During his years as Belgian prime minister, Michel had three crucial tricks that most defined the “Michel method.”
First, he combined different dossiers into mega-deals, often called “summer deals” as they regularly occurred during summer breaks when many journalists were on holiday and the limited attention eased the pressure.
Ministers and staffers often had to postpone family holidays until a deal was finally done, which sometimes increased the willingness to compromise around the table. By linking different issues, Michel made sure every party had a win in at least one issue that mattered to them. At news conferences afterward, everyone had something to brag about.
As an example, the “summer deal” of 2017 contained several dozen decisions.
Second, Michel sometimes left things vague on purpose so that disagreeing parties both felt good about the deal — making the outcome unclear or hard to finalize in law.
There are already indications that Michel is deploying this same strategy with his proposal to reduce the EU budget rebates over time. Merkel on Wednesday complained that Michel had attached no number to his plan to reduce the rebates.
“So far, apart from the proposal that rebates should be degressive, which we certainly do not want, there are no figures in the negotiating box on this,” Merkel said. “That really does make it impossible for us to make any assessment at the moment. But of course we told Charles Michel and his negotiating team that.”
The third, and perhaps most important component of the Michel method, was to push through a deal leaving unanswered the crucial question of how it would be paid for — ticking off items on everybody’s wish lists without worrying too much about who was going to pick up the check. That often yielded further negotiations, but the hard part was mostly done.
Replicating that trick will be particularly hard in an EU context as much of the battle is precisely about how the budget will be paid for — with the “frugal” countries watching like hawks for any attempts to grab more of their cash.
Some officials said there were signs that Michel has not yet grown into the larger role of Council president. For example, he continues to rely heavily on a very small circle of aides that followed him from the Belgian government, and still is not comfortable allowing aides and advisers to speak on his behalf, preferring when possible to do his own messaging to journalists though he has far less time for background briefings.
Michel also seems to retain his apprehension about trusting the civil service, perhaps because many officials in Belgium harbor partisan allegiances. As a result, he sometimes seems reluctant to lean on the EU’s large staff of professional officials, which is multi-national and prides itself on being apolitical. Instead, he still leans heavily on his tiny cabinet.
But if Michel comes up short of an agreement this weekend, one senior official said, it will not be for lack of ambition. Nor will he try to force a deal if it’s clear leaders are not ready.
“It’s a collective decision,” the official said. “But he is determined to make it work.”
Lili Bayer, Florian Eder, Rym Momtaz and Hans von der Burchard contributed reporting.
This article is part of POLITICO’s coverage of the EU budget, tracking the development of the seven-year Multiannual Financial Framework. For a complimentary trial, email email@example.com mentioning Budget.