Europe is stepping up the pace as it plans for the future in advance. The new EU budget only needed agreeing by the end of 2019, but the Commission was keen to publish its budget proposal for the 2021-2027 period early. This should come as no surprise, given the ongoing negotiations to set the conditions of the divorce between London and Brussels, as having a clear picture of the income and expenditure will help us to understand how the EU can go on without the UK.
The budget is an ambitious one. It asks each member state to contribute €1.246 in payments (i.e. actual cash investment) and €1.279 in commitments (estimated expenditure). It is also innovative in the way that it has revaluated and in some cases revolutionised the EU’s priorities. Let’s take a look at the highlights.
Overall numbers
The budget represents an increase of over €100 billion in comparison with the current seven-year plan (which included €908 billion in payments and €959.9 billion in commitments for the 2014-2020 cycle). There will be one fewer Member State this time around, with the UK set to leave, taking €15 billion per year from the coffers of the EU, who will ask the remaining members to dig deeper. Member States will need to contribute the equivalent of 1.1% of their GDP (up from the current figure of 1%) to the EU. “The future of the 27-state EU depends on this,” stressed European Commission President Jean-Claude Juncker.
What’s changed?
The Commission has made some clear choices that break with the direction of previous budgets. From 2020 onwards, the EU has decided to give less support to agriculture and help those countries that have been left behind to catch the rest up. It also wants to invest more heavily in young people, in order to fight the wave of populism currently being witnessed around the world, as well as focusing on policing its borders. It also wants to reward the countries that respect EU rules (on migrants and the economy, for example), while penalising those that violate them.
Looking at the budget in more detail, there is a clear need to spend more on migrants, with resources available for this set to increase by more than double. There will be finance for the common defence policy, with €20 billion allocated from a brand-new fund, while funding for the Erasmus programme will increase by 2.2 times in order to fight youth unemployment. The issue of security takes on a more central role, while greater focus will be placed on digital and research in order to incentivise European competitiveness around the world. In these sectors, the overall budget increase will work out as €109 billion.
The losers will be the more traditional areas of spending. It will be no “massive reduction, nor a massacre for the CAP or Cohesion Fund”, argued Juncker, inviting observers to focus on “the new policies we are financing, the doubling of the Erasmus and migration budgets and the notable increase in backing for research”. The Common Agricultural Policy (CAP) will lose 5%, while the Cohesion Fund, which helps countries that are lagging behind to catch up, will see a 7% reduction in its budget. Yet the direct payments to agricultural workers – which has always been the most hotly contested topic – are only going to be reduced by 4%, according to European Commissioner for Budget Gunter Oettinger.
The upcoming budget will benefit the Eurozone by a total of €55 billion, with €30 billion of this to go to the European Investment Stabilisation Function, which will intervene in countries struck by crisis in order to keep the level of public investment constant through loans guaranteed by the EU budget. The other €25 million will be assigned to those who implement the structural reforms suggested by the Commission and to ensure convergence in countries that adopt the Euro.
We could soon see the abolishment of the various discounts that currently benefit a range of countries, including the UK, and the long-mooted principle of “conditionality” may be introduced before long, whereby provision of EU funds will be linked to a requirement to respect EU laws. The Commission’s idea is to reduce or cut off funds based on the nature of the violation, with the Council of Europe then responsible for approving or rejecting this decision. The Eastern European countries are against the move, with the same nations also opposing the reduction to the Cohesion Fund, given that they are among its main beneficiaries.