Brussels in for clash with EU members over budget plans | Business | Economy and finance news from a German perspective | DW | 02.05.2018

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Brussels in for clash with EU members over budget plans

The European Commission has unveiled plans for its first post-Brexit budget for the 2021-27 period. A number of proposals are sure to put Brussels on collision course with Eastern European members and France.

The €1.279-trillion ($1.534-trillion) EU budget covering 2021 to 2027 was unveiled by the European Commission Wednesday following months of bickering and difficult consultations with the 27 members that will remain in the bloc after Britain leaves.

EU Budget Commissioner Günther Oettinger had traveled through the bloc warning that the UK's exit would create a gap of between €12 billion and €14 billion, with the loss of Britain depriving the EU of one of its biggest net contributors at a time when the bloc is trying to finance new areas such as defense and tackle migration issues jointly.

Oettinger said that gap could only be filled with a combination of cuts and more money from member states.

The current budget accounts for roughly 1 percent of the EU's gross domestic product (GDP), while Brussels is now asking members to contribute 1.114 percent of their overall economic output.

More money is to come in by taxing digital services, plastic waste and carbon emissions. The Commission wants a 3-percent consolidated corporate tax base to harmonize national rules on tax deductions. It also proposes that member states contribute a 20-percent share of revenues from national emissions trading auctions. Brussels says EU governments should also contribute 80 cents per kilogram of non-recycled platsic packaging waste.

The measures are expected to wash €22 billion annually into EU coffers, or some 12 percent of the total EU budget revenue.

It's fair to say that the plans are leaving almost everyone unhappy, from French farmers angry about looming reductions in funding to a number of national governments hating to pay more with populism and anti-Brussels sentiments on the rise in many member countries for years.

Cuts, but where?

The EU executive is primarily aiming for cuts in two main areas which together account for almost three-quarters of all spending. Reductions will hit the so-called cohesion funds used for development in poorer European nations. Right now, most of this money goes to Eastern European regions which still have a lot of catching up to do.

There's been criticism from Italy and Spain, saying that more of those funds should now be used to address mass youth unemployment in their countries.

According to Oettinger's budget plans, the EU's Common Agricultural Policy will also be scrutinized for cuts. Reduced funding is certain to draw France's ire as the country's farmers are the biggest beneficiaries of funds in this area.

Guntram Wolff of the Bruegel think tank told DW it was right to reduce farming subsidies. "We need to spend less on farming and more on protecting biodiversity."

While farm subsidies are to be trimmed, the bloc is willing to spend more on research and digital technology as well as on eurozone stability.

Rule of law

But the figures requiring cuts or higher contributions are not the only bone of contention. The budget plans are ruffling the feathers of Poland and Hungary, which — how could it be otherwise — are strongly opposed to proposals to link future funds to "respect for the rule of law."

Warsaw and Budapest have been at loggerheads with the EU over democratic standards and their refusal to accept refugees.

But the two nations have already made it clear that they will not tolerate attempts to impose conditions on the billions in funds they get from the bloc.

"We will not accept arbitrary mechanisms which will make the funds an instrument of political pressure," Polish Deputy European Affairs Minister Konrad Szymanski said.

Foreign aid funding to be boosted

With all the controversy around the plans, Brussels looks likely to fail in its attempt to push through the budget before the next European Parliament elections in May 2019. Several EU states have already warned the time would not suffice to overcome the current rifts among member states.

EU foreign policy chief Federica Mogherini was scheduled Wednesday to propose a single fund for managing most of the €123-billion planned for foreign aid between 2021 and 2027. The figure marks a 30-percent rise from the previous budget.

Foreign aid and development funding has been a large part of the EU's soft power which supports international diplomacy in the absence of a unified military.

Under the proposal, a few separate funds are to remain in place, for instance for supporting Syrian refugees in Turkey.

The Neighborhood and International Cooperation Instrument would have a €10.5-billion reserve for the first time to respond to new crises, Reuters reported. It's to replace the current system of negotiating a reallocation of funds from other parts of the budget.

hg/tr (AFP, Reuters)