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14th Aug 2022

'Cohesion' countries fight back to defend EU funds

  • Finland's Antti Rinne and EU council president Donald Tusk - last month's budget discussions among EU leaders failed to break the deadlock (Photo: Council of the European Union)

Leaders from the EU's eastern and southern countries on Tuesday (5 November) rejected efforts to cap EU subsidies they receive from the bloc's long-term budget or to attach conditions, they said in a statement.

Sixteen leaders met in Prague in order to defend the EU's cohesion policy, that is planned to be reduced to under 30 percent of the €1.135bn budget proposed by the EU commission in the 2021-27 period.

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The 'friends of cohesion' group leaders gathered in Prague as the negotiating battle for the next long-term EU budget (planned at 1.1 percent of EU gross national income by the EU commission) intensifies between those who want to cap EU spending and those who oppose it.

The so-called 'frugal five' countries, the Netherlands, Sweden, Denmark, Austria, and Germany, want to limit spending to one percent of GNI, while retaining their rebates - a reduction in their contributions - even as the original rebate recipient, the UK leaves.

But Britain's departure, which has been contributing €13bn annually, leaves a gap in the budget contributions that needs to be filled.

The EU commission argues that new priorities set out by EU leaders, such as innovation, security, defence, migration, need money to be dealt with more efficiently at EU level.

To make way for the new policies, the cohesion and the agriculture budget would be cut by seven and five percent respectively, which the leaders of Bulgaria, the Czech Republic, Cyprus, Croatia, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain oppose.

The commission also plans to introduce new 'conditionality' to the distribution of funds, in case irregularities occur and national authorities do not act.

In their statement, the leaders want to safeguard the funding for the cohesion policy in real terms at the current level.

"The cohesion policy represents a key EU investment tool which has significantly and visibly contributed to the real convergence of regions and member states within the EU and to the functioning of the internal market," the group said in the statement.

The significant budget reductions risk to hinder achieving its treaty-based objectives, they add.

"The current commission made a proposal that is not fair," Hungarian prime minister Viktor Orban said in Prague.

"The new proposal wants to reduce cohesion, in other words the poorer will get less and the richer will get more," he said.

The 'friends of cohesion' also want to have flexible rules on implementation, and they also want to see all rebates gone sooner than the commission's planned phase out of 2027.

"The commission proposal is really unacceptable for us," Czech prime minister Andrej Babis said at a summit.

No 'accountant mentality'

But those paying into the budget more than they get out of it, the net contributors, argue they need compensation, such as the rebate.

The EU commission on Tuesday argued that member states should not view their EU contribution in such a narrow way.

Chief of the commission's budget directorate Gert-Jan Koopman told journalists that often companies in the EU-15 or "old" member states benefit from cohesion funds spent in newer member in eastern and central Europe, as the winners of tenders.

The commission official also argued that the benefits of the EU's single market and such investment plans as the Juncker Plan make it difficult to calculate specific national contributions.

He said increases in spending are justified if the EU, for instance, wants to have an effective migration policy.

"Increase should be not compared with 'one' but with that if you don't do this, you'll have to fork out more from national budget for inefficient policies," Koopman argued, referring to net contributors who want to cap the EU budget at one percent of GNI.

"Finance ministers better be sensitive to this. If you keep the accountant mentality and if you aim at a one percent budget, which never existed before in the EU, you have to ask, are you serving the economic interest of your citizens and I am not sure," he told reporters.

On Tuesday, the commission nevertheless unveiled its proposed breakdown of member state contributions.

Last moth EU leaders discussed for the first time their positions on the EU budget.

Finland is due to set out a more detailed budget proposal later this month for discussion at an EU summit in mid-December.

Incoming budget commissioner Johannes Hahn said at his hearing last month that he would expect EU countries agree by the end of the winter next year.

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