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Martin calling for more details on EU recovery proposal at Brussels summit

Taoiseach Micheál Martin has said Ireland will make their own contribution to the “own resources” aspects of the €750 billion Covid-19 recovery fund.

Speaking in Brussels ahead of an EU summit, Mr Martin said Europe needs to give far more detailed consideration to other “own resources” proposals, including for example a digital tax.

“The full implications of that at a time of such unprecedented economic upheaval needs to be thoroughly examined until someone commits to that,” he said.

“We will not be support that at this meeting, as essentially we need to know the consequences of such measures.”

Mr Martin said an awful lot more work needs to be done at a European level to flesh it out.

He added that, because Europe has taken such a hit economically, “we do not want to do anything that would create further hits or further unintended consequences”.

He said that without question this is an ongoing agenda, in terms of the global world situation and global companies, and the need for member states to have sufficient revenue to deal with all the challenges facing everyone in health, education and so on.

Mr Martin is joining EU leaders for his first summit as Taoiseach and the first face-to-face summit in Brussels since late February, before the Covid-19 pandemic struck.

EU leaders will spend at least 48 hours attempting to reach agreement on a €750bn Covid-19 recovery fund, as well as the next seven-year budget.

European Council President Charles Michel said a deal on both issues is possible at the summit.

“With political courage, it’s possible to reach an agreement,” Mr Michel told reporters on arrival.

Ireland is among a number of member states pushing for a bigger share of the recovery fund.

However, there are numerous points of contention over how much of the fund should come via loans or grants, how the fund should be distributed and what conditionality should be attached.

Hungary, in particular, is said to have grave concerns over demands that the recovery fund be linked to adherence to the rule of law and democratic norms, in the context of ongoing allegations that Hungary and Poland are drifting towards totalitarianism and away from pluralism and an independent media and judiciary.

EU leaders are also expected to grapple with a range or sensitive issues over how the €750bn fund should be paid back.

One option is a special tax on digital companies, a measure that Ireland has reservations about, but which may well take at least a year to evolve.
Ireland’s share of the fund has so far been pegged at €3bn, an amount the Government has been keen to increase.

Ireland is concerned that the mechanism for calculating the allocation for each member state is based on a backward look at the economic profile over the past three years, with youth unemployment being a key metric of fiscal vulnerability.

Ireland believes this does not take accurate account of the dynamic impact of the pandemic on the Irish economy.

It is understood the Government is keen on a suggestion that 30% of the overall fund will be held in reserve until 2022-23.

In this way, officials suggest, economic statistics might over time give a truer picture of the pandemic’s impact on the Irish economy.

The Government believes it has already achieved a key breakthrough with the announcement last week of a so-called Brexit Adjustment Reserve.

This would be a fund worth €5bn, to be disbursed to member states most acutely affected by Brexit. Officials say that the European Commission would have to work out how the fund would be distributed.

The Government is keen that the recovery fund is agreed quickly and that resources go to the countries and regions in most need.

Leaders will gather for a plenary session first thing and they will be asked to set out their overall aspirations for the fund.

A series of bilateral meetings will then take place with the President of the European Council Charles Michel, after which a second plenary will take place.

Officials say the summit could run until Monday. Alternatively, leaders may agree to park discussions on Saturday and come back to Brussels later in the month.

Among the most controversial aspects of the fund would be the oversight that member states have on how the money should be distributed.

Each member state will be asked to submit reform plans to the European Commission, addressing the overall impact of the virus on their economies. Member states would then vote on whether to approve tranches of money for each capital.

It is understood the Dutch government wants each member state to wield a veto on individual disbursements, and that national parliaments should also have a say.

Under the recovery fund, known as Next Generation EU, the European Commission will borrow up to €750bn on the international markets using its triple A credit rating.

The money would be repaid over a 30-year period using a variety of fund raising measures, known as “own resources”.

These include a plastics tax, which the Irish Government supports, a border carbon tax, penalising third country importers using carbon-intensive industry, and a digital tax.

Ireland has in recent years opposed any measure to impose a special tax on hi-tech multinationals.

Officials say, however, the Government would examine any proposal on a digital tax before giving any response.

Another “own resource” would be for the Commission to claim back more of the funds raised by member states when they apply EU tariffs to imports entering the customs union.

Currently, capitals are entitled to keep 20% of EU tariffs which are accrued via third country imports into the EU.

The European Commission has proposed reducing that amount to 12%, while the latest negotiating draft puts the figure at 15%.

Ireland wants to keep the figure at 20% and has argued that Brexit will increase the costs for Ireland of applying EU tariffs.

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