BRUSSELS (Reuters) – EU governments have repeatedly postponed the debate on EU finances since 2021.
But on Friday, for the first time, the summit seriously dealt with proposals for how much money the EU should spend on which areas in the next seven years. Reactions to the first proposals of the Finnish Council Presidency have shown what the EU will have to deal with in the coming months – a stab and stab in an amount that is likely to be just over a trillion euro. Not only the interests of net contributors and net recipients have clashed, but also different views on how the EU should position itself best for the future.
Germany, which will take over the six-month presidency of the EU Council on July 1, 2020, is counting on a quick agreement later this year. Like the European Commission, Chancellor Angela Merkel warned that a late deal would threaten the financing of EU programs in 2021 and 2022. The reason for this is the long application deadlines for financial aid. “But the matter is simply too complicated and will probably not be resolved by the end of 2020,” the EU diplomat suspects.
HOW MUCH MONEY SHOULD YOU PAY?
The first thing to clarify is how much money the 27 EU Member States are willing to make available – after the UK’s expected exit. Here the numbers vary considerably. At the top end is the European Parliament, which demands 1.3%. economic production of the Member States. The European Commission proposed 1.11 percent. At the other end, there are net contributors like Germany who want to pay only 1 percent – Merkel explained this again in her government statement on Thursday.
The Finnish Council Presidency has now proposed a compromise corridor of between 1.03 and 1.08% and has been criticized by both camps. To understand what is at stake: the Finnish proposal would run between € 1,050 and 1,100 billion over seven years from 2021.
If the UK goes out as planned, the EU will not only lose its main net contributor, which will have negative repercussions on other financiers such as Germany. The famous British discount, which gave the EU a very complicated system of deduction from the percentage actually paid on its own production, will also be abolished. As a result, for example, Germany has negotiated a rebate on the rebate – partly because returns from Brussels are lower than in some other countries.
The Finnish proposal simply abolishes all rebates and provides transparency in the complex calculations of the EU funding system. But Germany, for example, categorically rejects it. Merkel insists on a discount because the federal government fears that otherwise German contributions would blow up the roof. “In the end, there will probably be some kind of rebate system,” announced an EU diplomat on the sidelines of the EU summit.
Because even 1.0 percent. would mean after the departure of the British that Germany’s payments to Brussels would increase by 10 billion euros without regulating the correction, argues the federal government. Under the Commission proposal of 1.11 percent, the German net contribution threatens to increase by another five billion euros a year, and then up to 45 billion euros.
MONEY FOR OLD FLATS OR NEW TASKS?
At least as important as the amount is the question of what the money should be spent on. For years, there has been public criticism that the EU is paying too much for agriculture and not enough for future matters. Over the decades, at least one percent of agricultural spending has declined. Finland has now proposed to split the budget into three parts in the future – one third for agriculture, one third for structural aid to weaker countries and regions, one third for future tasks such as innovation, research, combating climate change and common foreign and security policy.
However, the consultation quickly showed that almost all EU countries want to continue to prioritize agricultural subsidies. Now we think “creatively”. For example, some climate protection expenditure may go to agriculture. Overall, structural assistance is at least as important for the countries of Eastern Europe. But Merkel also stressed in her government statement that the federal government insisted on continued EU structural aid, for example for the countries of eastern Germany.
An additional contentious issue is the desirable future linkage of EU payments with respect for the rule of law. This has “top priority” for Merkel. Countries such as Poland and Hungary, however, are skeptical about this – and the EU’s financial framework must be agreed unanimously.
No agreement can be expected in the first debate. However, Finland intends to propose specific figures for each area before the end of the year. The procedure then formally passes to the area of the permanent President of the EU Council. Brussels has doubts as to whether the outgoing President of the EU Council, Donald Tusk, still has the ambition to convene a special summit on the EU financial framework in November. It is also considered unlikely that his successor, Charles Michel, would immediately want to solve the gigantic task at his first EU summit in December. Croatia will take over the presidency of the Council in the first half of 2020. It is also unrealistic that a relatively new EU member will cut the Gordian knot. Then it would be Germany’s turn.