Monday

21st May 2018

Analysis

Commission wants bigger post-Brexit budget

  • Commissioner Guenther Oettinger will present the commission's overall figures next Wednesday (Photo: European Commission)

A week before the much-anticipated moment when it will present its ideas for the EU's post-2020 budget, the European Commission is now fine-tuning its proposals.

But the main message is not going to change: the EU executive will urge member states to endorse a message of strength and unity by investing more in Europe after the UK has left the club.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Migration will play a role in calculating how much countries can receive as part of the cohesion funds in future. (Photo: plan-international.org)

Commissioner Guenther Oettinger will roll out a framework and headline numbers for the next seven-year budget on Wednesday 2 May.

The commission plans to put forward a budget that is larger than the previous one, and is expected to propose that budget for the period of 2021 to 2027 should be between 1.13 and 1.18 percent of the EU's gross national income (GNI), compared to the 1.0 percent now.

Consequently the commission will put out specific legislative proposals on specific areas - such as agriculture, cohesion and research - by mid-June.

The final decision on the budget will be taken by national governments, that are being asked by the commission to foot the bill for at least half the gap left by the UK's departure, and new challenges, such as migration, terrorism or border security, which need extra funding.

Officials warn that four to five overall 'net payers' have entrenched in a tough negotiating position and do not want to pay a cent more into the EU budget.

Austria, the Netherlands, Denmark and Sweden are sceptical about a larger EU budget, even though the largest net payer, Germany, has pledged to chip in with more.

"Some net payers are very upset with Germany," said a senior EU source. With eurosceptic London out, and fiscally conservative Berlin supporting a larger budget, smaller member states are now being asked to play the 'bad guy' role in negotiations and stick to a 'no higher contributions' position.

But others say the 'net payer philosophy' is outdated, and argue for example that for every euro spent by net contributors on cohesion funds, 70 cents comes back to net countries as their companies are hired to carry out the work.

"We need 27 small winners," said another senior EU official, pointing to a possible amiable conclusion to the talks.

The commission plans to close the Brexit 'gap' by going half-half: a 50 percent cut and 50 percent more money from the remaining EU-27.

New responsibilities are planned to be covered to a rate of 80 percent by fresh money, and the commission is to add 20 percent by structural changes in the budget.

Cuts will come mainly from the two big EU policy areas, cohesion – an average of about six percent compared to the current EU budget – and agriculture.

Research and the Erasmus student exchange program should not be touched, according to the EU executive.

The commission will propose to raise money at an EU level by transferring a share of the proceedings from the Emission Trading Scheme (ETS) from national level to European level and to introduce a plastic tax.

The EU executive also wants EU governments to contribute to the budget by allowing the revenue central banks get from issuing money to flow into the EU budget. The same would apply to the European Central Bank's profits.

"Brexit is a game changer, we are missing €12-14bn [per year] after transition," the senior EU official said.

The new expenditures, such as hiring "thousands" of EU border guard officials, would amount to €8-10bn annually.

The commission will argue that the new priorities have a European 'added value', and that it is more effective to spend the money together.

There will be no special eurozone budget, but "several billions" will be earmarked to deal with asymmetric economic shocks, encourage reforms, and help countries that want to join the euro.

Rule of law check

But several tricky political issues could upset the commission's plans for a big budget.

The commission will propose a 'rule of law conditionality' in this next long-term budget that will focus on the independence of the courts in member states to protect investments and EU taxpayer money.

The issue is expected to be the most politically sensitive in the upcoming battle to negotiate the seven-year budget, which traditionally takes years of haggling among EU member states.

The precise mechanism on rule of law conditionality is still being fine tuned in the commission's corridors to make sure the plans are legally watertight.

The notion to tie EU funds to European values have gained traction recently as the commission raised rule of law concerns in Hungary, Poland, Romania and most recently Malta.

Some have argued for including the entire list of human rights as enshrined in Article 2 of the EU treaty to be linked to EU funds, but that would be on shaky legal foundations, officials admit.

Instead the commission is planning to put forward a proposal that would analyse the independence of the courts based on specific legislation in a member state to make sure EU financing and investment is properly protected.

"In the interest of our European citizens and taxpayers, we must have a guarantee that courts are independent, not pending on a government," said a senior EU official.

Some countries which benefit from the EU's cohesion funds (aimed to close the economic and development gap between EU members), worry that the link could be used for political pressure.

Poland and Hungary have already stated they reject the idea, and consider it "political blackmail."

"It is not a lex [law about] Poland, it is a general obligation," the senior EU official said, rebutting the assumption that the so-called 'conditionality' will be used for targeting specific member states.

The mechanism is not yet clear-cut however, and several options are being worked out. The commission has mulled the possibility of involving the European Parliament and member states in reviewing the independence of courts.

It is also still open whether the mechanism will be a pre-screening or an 'after the fact' probe. However, the commission aims to remove some programs from possible sanctions, such as research.

According to the plans, only a majority of EU countries could reverse a decision by the commission to launch the mechanism.

However, the commission is mute on how to convince countries such as Hungary and Poland to agree to such a procedure.

The senior official said several member states that are reluctant to pay more into the EU budget after Brexit might change their minds about additional contributions if they see their funding secured - which might then be an incentive for Hungary and Poland to agree to the conditionality.

"Without the commission's rule of law proposal, the [budget] deal would not be really balanced," the official said, but adding that not to propose anything would also be wrong.

The commission will also use its own economic analysis under the so-called European semester to adjust the cohesion funds.

New calculations

Another issue likely to cause a few 'three-shirter' summits – EU diplomat jargon for all day-and-night meetings – is the proposal to introduce migration as an economic indicator.

Besides the GDP per capita indicator, migration will also play a role in calculating how much countries can receive as part of the cohesion funds. But to what extent is still undecided.

"It is not about sanctions, it is about if a member state does a lot, and has to pay a lot of money, it will play a certain role calculating his right to get cohesion funds," the EU official said.

EU countries that are reluctant to take in migrants, most vocally from central and eastern Europe (who are beneficiaries of the cohesion policy), are against the idea to link the fund for any migration policy.

Timeline

The commission want to pursue an ambitious timeframe, finishing the usual years of negotiations by the European elections next spring, and warning a deal could endanger financing programs.

"The political reality is that it is difficult to do so. Governments need time at home to sell a deal," a source said.

The key budget issues on EU leaders' table

As EU leaders gather on Friday to start discussing the future of the EU's spending after the UK leaves, major battle lines are already emerging among member states. Here is a look at the key issues.

EU leaders to kick off post-Brexit budget debate

EU-27 leaders will meet on Friday to draw up battle lines and possible fields of compromise over the EU's next seven-year budget - the first one after the UK leaves the bloc.

Agenda

All eyes on the EU budget This WEEK

The European Commission will next week unveil its ambitious proposal for the first EU budget without the UK. In the European Parliament, its the Belgian PM's turn to talk about the future of Europe.

Opinion

Linking EU funds to 'rule of law' is innovative - but vague

Defining what constitutes 'rule of law' violations may be more difficult than the EU Commission proposes, as it tries to link cohesion funds in east Europe to judicial independence. A key question will be who is to 'judge' those judges?

Opinion

Europe's budget stasis

The EU's budgetary muddling through might not be enough when the next crisis hits.

News in Brief

  1. Trump warns Nato allies' low budgets will be 'dealt with'
  2. Only Estonia, Greece and UK hit Nato spending target
  3. EU to start process to counter US Iran sanctions
  4. Macedonia PM sees 'possible solutions' in Greek name row
  5. EU takes six countries to court over air pollution
  6. New Catalan leader sworn in without reference to Spain
  7. Merkel and Putin revive dialogue in troubled times
  8. European companies putting Iran business on hold

Stakeholders' Highlights

  1. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  2. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  3. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  4. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  5. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  6. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  7. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  8. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  9. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  10. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  11. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  12. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May

Latest News

  1. Athens mayor wants direct access to EU migration fund
  2. Nordics could be first carbon-negative region in world
  3. Zuckerberg and Trump top the EU's agenda This WEEK
  4. Integration of Syrian refugees in Europe needs scrutiny
  5. Bulgarian PM: No asylum reform without stronger border
  6. Eight countries to miss EU data protection deadline
  7. Italian populists to defy EU debt rules
  8. Commission 'playing tricks' with EU budget figures

Stakeholders' Highlights

  1. EU Green Week 2018Green Cities for a Greener Future. Join the Debate in Brussels from 22 to 24 May
  2. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  3. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  4. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  5. Mission of China to the EUProgress on China-EU Cooperation
  6. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  7. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  8. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  9. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  10. UNICEFCalls for the Protection of Children in the Gaza Strip
  11. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  12. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight

Stakeholders' Highlights

  1. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  2. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  3. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  4. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia
  5. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector
  6. Swedish EnterprisesEU Tax Proposal on Digital Services Causes Concern for Small Exporting Economies
  7. European Jewish CongressCondemns the Horrific Murder of Holocaust Survivor Mireille Knoll in Paris
  8. Mission of China to the EUAn Open China Will Foster a World-Class Business Environment
  9. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  10. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  11. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  12. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations