European budget: the debate continues between net contributors and net beneficiariesMarch 4, 2020
Hat: European budget: the debate continues between net contributors and net beneficiaries
Funding Scheme: 2020-03-04
“This road may take a few hours, days and nights”, the premonitory words of French President Emmanuel Macron heralded a long and perilous debate on 20 and 21 February on the European Union (EU) budget negotiations for the period 2021-2027. An ambitious but complicated agreement that remains uncertain about the EU’s next investment priorities.
“We have worked very hard to try to reconcile the different concerns, the different interests, the different opinions expressed. But we need more time,” said European Council President Charles Michel at the end of the summit. This failure of the first attempt to agree on the EU budget for the period 2021-2027 is not a first, as heads of member states usually need two summits before reaching an agreement.
Yet this time no date for a new summit has been given. It must be said that the disagreement was particularly deep and that the negotiations were conducted under the Brexit sign, which meant a loss of the British share: 60 to 75 billion euros. The President of the European Council proposed to raise EUR 1 095 billion for the period 2021-2027. This budget represents 70% of the Union’s resources, with the remaining 30% coming from the EU’s own resources, which is what the EU is allowed to spend to finance its major policies. The debate centred on the amount of contributions per Member State and since each Member State contributes according to its economic weight, it was clear that two groups with opposing positions would form, thus blocking any unanimous decision. A hiatus then emerged between the net contributor countries, which receive less than they give, such as Germany, Denmark, Sweden, the Netherlands or Austria; and the 17 net recipient countries, which receive more than they give, such as Poland, Greece, Hungary or Romania. This situation therefore gives rise to “differences that are still too big to reach an agreement”, according to Angela Merkel. The former defended a stable envelope at 1% of European Gross National Income (GNI), while the latter argued that the reality of Brexit should be taken into account. The latter wanted to protect traditional programmes, such as infrastructure funding and the Common Agricultural Policy in the name of European cohesion and asked for a budget equivalent to 1.3% of European GNI.
Another element of the debate was that the funding priorities and the conditions for their allocation also needed to be redefined. While France is above all keen to safeguard the CAP, other countries such as Poland or Hungary are focusing on maintaining cohesion funds: these aids are dedicated to the economic rebalancing between the richest and poorest regions of the EU. Germany, for its part, wants priority to be given to financing new technologies and innovation or better management of migratory flows. Poland and Hungary, two countries covered by Article 7, which provides for a penalty mechanism in the event of failure to respect the rule of law, strongly opposed the Commission’s proposal that EU funds should only be paid out if member states respect the rule of law, an idea that could, however, convince the most reluctant countries to increase their contributions.