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The fight for the new post-Brexit EU budget
by Christos Mouzeviris
2018-06-18 08:44:54
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Britain’s exit in March next year will deprive Brussels of some 12 billion euros from an annual budget now running around 140 billion euros.

That hole has already prompted to some quarreling between other net contributors, which do not want to make up for the loss, and the Eastern states, which say they should not suffer from cuts in EU subsidies. (Irish Independent)

Günther Oettinger presented the draft EU budget for 2018 on the 30th of May, acknowledging decision-making difficulties. 

ukbudg0001_400The Commissioner said that the draft budget had taken account of recommendations from the Parliament and the member states, by increasing the amounts allocated for the Erasmus+ programme, as well as for Horizon 2020. 

Also, the European Solidarity Corps, a new initiative which provides volunteering placements, traineeships and job offers for 2-12 months, is getting its own budget for the first time.

While the EU Commission labeled it an exercise in stimulating job creation for young people, boosting growth and strategic investments, for some of the bloc's members things are more complicated. (Euractiv)

Last February eight Eastern European EU countries agreed to support an increase in payments by member states in the bloc’s next long-term budget, but recently things turned a bit sourer.

The problem is that until now, the largest source of revenue in the EU’s budget is a uniform percentage levied on the gross national income (GNI) of each member country. (Irish Independent)

All this is about to change, due to a new styled budget. Warsaw and Budapest are expected to lose out on massive amounts of cash as Brussels proposes to move tens of billions of euros in EU funding away from central and Eastern Europe to the countries worse hit by the financial crisis, such as Spain and Greece. 

The aim of the plan is to support the less developed parts of the union as Brussels does not want to continue distributing cash just based on a country’s wealth or GDP. Cash given to countries will depend on different criteria such as youth unemployment, education, the environment and innovation. (Express)

In addition to the above alteration of EU's priorities, the Commission, backed by Germany, France and the EU’s other wealthy budget contributors, want to tie funding on which poorer eastern countries rely to respect for the rule of law. This could cost Hungary and Poland millions of euros.

The two countries found themselves in the bad books of EU, after a series of misconducts. First, it was their rebellion against the bloc's migrant quota, in order to deal with the refugee crisis. In addition, their shift to more authoritarian government and the reformation of their judiciary system, did not go down very well with the rest of the EU.

There have been many calls from top European politicians to cut funds towards these two nations, or even limiting some of their voting power in the Council of EU. While there is a justification in such calls, as EU membership comes with certain obligations, the danger here is from where these two countries will seek to cover the gap in their income.

Poland has already hinted at allowing more US bases to settle in its territory, no doubt with further US financial support, while Hungary is known to flirt with Russian elites and influence. Can the EU push these two countries further away from its core? 

By May, the prime ministers of Hungary and Poland, allies in their disputes with Brussels, united in opposing cuts under the European Union’s new budget. The EU plan is set clearly to cut money in the 2021-2027 budget for member states that interfere in their legal systems. Poland and Hungary however, insist on protecting the interests of their farmers. (Reuters)

These two countries are not the only ones which may be heavily affected by the new budget. Ireland’s annual contribution to the EU budget is likely to rise to over €3 billion, more than 50 percent above the current level.

However, the budget is framed around cuts to farming subsidies that the Irish economy is dependent on. In an effort to cut costs and promote other policies, farmers will see aid shrink in the 2021-2027 period to €365 billion, down 5 percent from the current Common Agriculture Policy budget.

Something that France too, by far the largest beneficiary of CAP, has already signaled their opposition to the proposed cutbacks in farm spending. (Irish Times)

From the Irish point of view, there is a concern on contributing more, if it means more funds going towards security and less on agriculture.

Ireland, a country that is neutral, may have to be spending money on European defense, while at the same time cutting the backbone of its economy by the reductions to CAP. For its farmers and many of its MEPs, that is an issue. (RTE)

It is really regretful that many countries want to hold on to what already exists. Reforms are always painful and bring challenges, yet they are necessary to progress and deal with the increasingly fluctuant reality that Europe finds itself in.

From Brexit to American change of foreign policy under Trump, increased security issues and immigration, a multipolar world with many emerging economies and blocs, or the assertiveness of China and Russia, Europe is faced with many challenges.

The Common Agriculture Policy has always been a great source of income for Europe's farmers, and a pillar of the European economy. Yet things are constantly changing and like everything, it has to be reformed, in order to adapt. Europe cannot rely forever largely on agriculture.

EU policies must reflect the needs of Europe's economy and political reality, which have been changing for many decades now. Thus, we need to keep updating them. Naturally, any drastic alteration always leaves some losers while others as winners. However, this shift is necessary.

We need to diversify our economy, both as individual member states and collectively as a continent, in order to prepare our future generations for the world that is coming. With America becoming an unreliable partner, we have to start looking after ourselves.

This budget is only the beginning. As some states will lose out from CAP, the richer nations must realize that the smaller, poorer ones will need a new different type of funds and support, in order to keep their economy thriving, by investing directly in these countries.

Thus, a further integration of the European economy is much needed and the solution. And while rich member states like Germany oppose and block this development, it will come a day that even they won't be able to stop it, unless they are ready to see the disintegration or further fragmentation of the block.

The best way to deal with disobedient member states like Hungary and Poland, or weaker economies like Greece and Irish or French over-reliance on CAP, is to modernize, diversify and harmonize further the European economy. If everyone has a secure flow of investments to achieve this, the quarreling will soothe out, while in addition there will be less foreign interference in EU, as there will be a lesser need for third-party cash.

In other words, if every EU member state is wealthy and has a stable economy, the more engaged and committed it will be with the bloc and its requirements. In theory at least. Inequality on financial terms, protectionism within Europe, conservatism and petty nationalism will have to give way for the greater good of the continent, in order to achieve collectively bigger achievements. European countries must finally decide which direction they want to follow and this budget hints of hopeful changes.


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