Tuesday

23rd Oct 2018

Hungary and Poland to lose quarter of EU funds

  • Commissioner Cretu arriving to the weekly meeting of commissioners (Photo: European Commission)

The European Commission has proposed steep cuts in cohesion support in the next longt-term EU budget to eastern European member states, according to theEU executive's detailed plans on Tuesday (29 May).

Two countries that have caused headaches for the commission over the last years over migration and rule of law, Hungary and Poland, will be hard hit.

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Hungary's cohesion allocation will be cut by 24 percent, while Poland will get 23 percent less money in the 2021-2027 period in 2018 prices. The overall cut in cohesion policy will be around 10 percent.

The deep cuts in funds to the countries that are the loudest critics of the EU's migration policy could inflame political tensions among the eastern and western member states.

The commission however argues that the reduction is not a punishment for criticism and that it is misleading to compare funds available per countries, when it calculated the allocation by focusing on regions.

"I hope you don't expect us [to] start making statements about individual member states, it does not make sense … we are talking about regions and their prosperities," Corina Cretu, commissioner for regional development, told reporters.

Funds directed to the Czech Republic would also be cut by 24 percent, along with Lithuania, Estonia, and Malta. Slovakia and Germany would also get more 20 percent less cohesion money.

Italy, on the other hand, would get 6.4 percent more. Romania, Greece and Bulgaria would get 8 percent extra and Spain and Finland 5 percent more.

"There is no political top-down decision," an EU official commented on whether the move away from eastern countries was a political decision.

Nevertheless, on 2018 prices, allocation to the three Baltic states and the Visegrad Four of the Czech Republic, Hungary, Poland, and Slovakia will be less by €37.5bn between 2021-2027 compared to the current budget.

Calculating

The commission, as expected, also tweaked the way it calculated allocation of cohesion funds.

Traditionally it used a region's GDP per capita figure to reflect its prosperity. Now that criterion is reduced from 86 percent to 81 percent and the commission added other criteria, such as youth unemployment, climate, low education levels, and the reception and integration of migrants.

"This will better reflect the reality on the ground," commission vice-president Jyrki Katainen said.

Some central and eastern European member states have criticised the introduction of new criteria and they fear it is another way for the EU executive to divert money from them to southern, crisis-ridden EU countries.

But the commission warns that since regions in Hungary and especially Poland have performed so well in terms of GDP growth, the two countries would have suffered even bigger cuts if 100 percent of the allocation would have been based on GDP per capita criteria.

"The exercise is not about transferring money from east to south," an EU official said.

"The fundamental reason for the change is driven by the change in GDP, and growth of GPD in the east," the official added.

Poland's GDP grew by 3 percent in 2016, 4.6 percent in 2017 and is projected to expand by 4.3 percent according to the commission's forecast. Hungary's economy grew by 3.3 percent in 2016, 3.4 in 2017 and is expected to grow by 4 percent this year.

Meanwhile, Italy's economy was lagging by 0.9 percent in 2016, 1.5 percent in 2017 and 1.5 percent in 2018, according to the commission's figures.

The commission argues that, for instance, specific regions in Portugal grew faster over the last period, which resulted in a 7 precent cut in cohesion support, even though the country itself has been struggling with the effects of the crisis and only grew by 1.6 percent in 2016, although it picked up in the two past years.

"Nobody should be dissatisfied if countries are doing better," Katainen said.

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