Picking up the bill

EU budget plans end up pleasing no one

EU-Finanzplanung für den Zeitraum 2021 bis Ende 2027
Bean counter-in-chief. Source: DPA

The European Commission likes to remind the EU’s 510 million citizens that its budget costs them less than a cup of coffee per day. Nevertheless, it took member states two years to agree the last seven-year budget in 2013. And that will probably be plain sailing compared to the latest plan.

EU Budget Commissioner Günther Oettinger, presenting his draft “Multiannual Financial Framework” for 2021 through 2027 on Wednesday, proposed spending about 10 percent more as a share of output. That’s despite the bloc shrinking with the departure of the UK, one of the biggest net contributors.

He wants to spend about 1.11 percent of the 27 nations’ combined economic output compared to 1.03 percent of the current 28-country budget.

Calculated in today’s prices, the proposed increase looks relatively modest at around €45 billion to €1.135 trillion ($1.36 trillion). But adjusting for inflation and economic growth, the rise will be a whopping €190 billion to €1.279 trillion. All EU members have to agree on the plans.

“There will be cuts, which many countries will complain about. And there will be new spending, which the others will complain about.”

Günther Oettinger, EU Budget Commissioner

The Commission says it needs to hike spending to meet the challenges of illegal immigration, digital change, global warming, terrorism and military conflicts in neighboring regions – while finding the money to plug the €12 billion annual hole caused by Britain’s departure. It also needs to balance its carrot-and-stick policy towards its unruly eastern members.

“We’re addressing the problems by doing both: saving and asking member states for higher contributions,” said Mr. Oettinger. But the focus is clearly on the latter. He wants Germany, the EU’s biggest net contributor, to pay €10-11 billion more per year. That’s probably more than Berlin is willing to pay, as German Finance Minister Olaf Scholz implied on Wednesday. He said all member states must contribute to a “fair distribution of the burden.”

That comment was directed mainly at central and eastern European countries that joined the EU in and after 2004, especially Poland and Hungary. They receive billions of euros from the EU’s fund system for structurally weak regions, but will receive less under the new plans as they have achieved rapid economic growth in recent years.

Poland and Hungary could face even bigger cutbacks under Commission plans to withhold payments from authoritarian governments that weaken the rule of law. Both are at odds with the EU over recent government reforms that have tightened controls of the judiciary and media. With EU budgets requiring unanimous approval of member states, it’s not surprising that the Polish government said there was “a long road ahead” to reach a compromise.

03 p07 EU budget-01

Mr. Oettinger wants to cut structural funds and farming subsidies by around 5 percent each. That would cut their combined share of the total budget to around 60 percent from over 70 percent now.

Big farming groups in western Europe will be among the main losers, although it’s a relatively modest drop. However, France is opposed to any subsidy cuts to its large agricultural sector and several German farming states are also spoiling for a fight.

And it seems Mr. Oettinger can’t please anyone, even net recipients. The EU’s Horizon research program is set to receive a 30 percent boost to €97 billion, but that is far less than was hoped for by industry groups and universities.

“With the proposed amount Europe will continue to lose ground against its international competitors,” said Joachim Lang, director of Germany’s BDI industry federation.

Mr. Oettinger remained philosophical. “There will be cuts, which many countries will complain about,” he said. “And there will be new spending, which the others will complain about.”

He wants the EU to agree on the budget within a year. Good luck with that, as negotiations could drag into 2020.

Ruth Berschens heads Handelsblatt’s Brussels office, leading coverage of European policy. David Crossland adapted this story into English for Handelsblatt Global. To contact the author: berschens@handelsblatt.com

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