5 big EU budget headaches

It’s meant to be about the budget, not Brexit.

At the European Council summit on Thursday and Friday, European leaders are due to get to grips with what is usually one of the biggest battles in Brussels — the fight over the next long-term EU budget.

Not for the first time, a summit has been overshadowed by the latest Brexit drama. But the budget remains on the agenda — and it’s not where the European Commission wanted it to be at this stage.

Back in May, when the Commission laid out its €1.14 trillion blueprint for the 2021-2027 Multiannual Financial Framework (MFF), President Jean-Claude Juncker targeted a final deal before the European Parliament election in a year’s time.

But, leaders will acknowledge, that won’t happen. Instead, they’ll aim to reach a deal by autumn of next year, according to draft conclusions of the summit — although some countries are skeptical about even that target.

“It’s logical that if there are doubts about the rule of law in a member country that those worries or problems should be solved as pre-condition for receiving [money], especially cohesion funds” — Dutch Foreign Minister Stef Blok
The timetable is not the only thing that’s veered off track. Some of the Commission’s other grand plans to use the budget to leave its mark on a wide range of policies for years ahead have also hit serious roadblocks.

Here’s a rundown of five things causing big budget headaches for the Commission and EU members.

1. Brexit
Yes, back to Brexit again. The departure of a major net contributor to the budget leaves a big hole — of about €12-13 billion a year — in the EU’s coffers. That has added another tricky dimension to budget negotiations, which are complicated at the best of times.

To plug the hole, the Commission proposed that other countries should chip in more this time around. That hasn’t gone down well with a group of wealthier countries, such as the Netherlands, Austria, Denmark, and Sweden. Their informal slogan is “a smaller EU, a smaller budget.”

Uncertainty over the U.K.’s future relationship with the EU has also made it impossible for budget negotiators to determine what role Britain will play in EU programs — and what money might be flowing from London to Brussels as a result.

2. Agriculture
Agriculture Commissioner Phil Hogan had big plans to make his mark on the Common Agricultural Policy, which accounts for the largest chunk of spending in the current EU budget. As funding for the policy looks set to fall, he announced plans in June to hand power back to member countries. The theory is that this would allow national governments to deliver more for their farmers and the environment. The Commission would then vet what governments come up with to block unwanted consequences, such as environmental harm.

But the plans have come under heavy fire from politicians, farmers, environmentalists and even EU institutions. National governments say that, unless Brussels is highly vigilant, member countries will design policies to give their farmers a leg-up over neighbors and precipitate a race to the bottom.

Environmentalists, meanwhile, argue that plans to ax strict EU-wide rules in favor of voluntary incentives will not green the farming sector. The European Court of Auditors, the EU’s financial watchdog, agrees. It released a damning opinion of the proposals in November, finding that its environmental protection measures were feeble and the overall plans muddled.

As if that weren’t enough, the MEPs complained that the reform will neuter the Parliament’s oversight role in farm policy. Under the current setup, they have influence over major legislation as part of three-way negotiations with the Council and Commission. Under the new plan, the Commission and governments would effectively manage agricultural policy between themselves. Parliament’s lawyers raised a series of legal questions about the plans.

3. Rule of law
One of the Commission’s flagship proposals for the next budget cycle is to link EU payouts to respect for the rule of law.

The plan reflects a view within the Commission and western members that other countries — such as Poland and Hungary and, to a lesser extent, Romania and Malta — are not upholding EU values while receiving large amounts of EU cash.

“It’s logical that if there are doubts about the rule of law in a member country that those worries or problems should be solved as pre-condition for receiving [money], especially cohesion funds,” Dutch Foreign Minister Stef Blok told POLITICO in an interview.

This view is shared by the likes of Germany, Finland, France and Sweden, as well as by a number of senior Commission officials.

So the Commission proposed a new regulation on “protection of the Union’s budget in case of generalized deficiencies as regards the rule of law in the member states.”

The proposal, however, quickly became one of the most contentious issues of the budget package, with the likes of Poland and Hungary raising strong objections. And the Council of the EU’s own legal service, as well the European Court of Auditors, raised concerns about the structure and legal basis of the Commission proposal.

Some western EU countries are convinced that with some changes, it is still possible to create a credible way to link EU funds to the rule of law. Others are pushing for all mentions of the rule of law to be erased from the proposal. The two sides remain far apart, with some countries stuck in middle.

4. France’s eurozone dreams
Paris is leading a fight for a budget dedicated to the euro area. As part of a compromise with Berlin, a Franco-German proposal puts this new budget inside the Multiannual Financial Framework, which covers the whole EU.

That leaves other EU governments, some of whom deeply dislike the whole idea of a eurozone budget, wrestling with multiple questions. Will they accept some kind of eurozone budget? How big should it be? How would it work?

Another complication: The Commission had already come forward with its own proposal that contained elements of a fledgling eurozone budget.

At the summit this week, leaders of the eurozone countries plan to task the European Commission with coming up with a detailed proposal for a “budgetary instrument for convergence and competitiveness for the euro area.”

According to draft conclusions of the Euro Summit on Friday obtained by POLITICO, the budgetary instrument “will be part of the EU budget and be subject to criteria and strategic guidance from the euro area Member States.”

This mandate will force the Commission to rewrite parts of its budget proposal at a time when the European Parliament has already produced reports and opinions on the current plan and representatives of EU governments have already spent many hours poring over the Commission’s draft.

Advocates of the eurozone budget will also need to convince EU members that don’t use the euro, such as Poland, to sign up to having the new fund inside the MFF.

5. Campaign politics
The campaign for next May’s European Parliament election makes the budget negotiations more complicated.

Some parties, such as French President Emmanuel Macron’s La République En Marche, argued it would be undemocratic to sign up to a seven-year financial plan before the vote. Other MEPs worried that a budget vote could be used against them in the campaign. All of which made a deal before the election unlikely.

Jean Arthuis, the chair of the Parliament’s budgets committee, said it could be hard for candidates to stress their own political identity in the campaign if they had just voted with rival parties for a budget deal.

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *