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EUs long-term budget summit ended in failure

EUs long-term budget summit ended in failure


The unity demonstrated by the European Union during difficult negotiations with the United Kingdom has evaporated. And this is at a time when it is so important for the EU to prove its viability right now - even after leaving the European family, even if it is a very stocky, but not poor, gentleman.


"We are waiting weeks, or maybe months, of discussions to draw up an ambitious and fair EU budget for 2021-2027," Polish Prime Minister Mateusz Moravecki wrote on social networks yesterday, 23 February. So he estimated the results of the first European leaders summit after leaving the EU. And it ended to no avail precisely because of disputes over expenditures and redistribution of budgetary funds between 27 countries.


Last Thursday and Friday, the discussion lasted 27 hours. And then the leaders came together on the evening of February 21 for another 25 minutes to make sure that a compromise between them was impossible.


The dividing lines, as usual, arose between the countries of Western and Eastern Europe, between the rich countries who want to reduce their contributions to the general box office, and those who wish to receive from it, if not more, as much as before. And also between the leaders of individual countries and the representatives of the recently formed European Commission, who are advocating for increased spending on climate change. All this against the backdrop of mass protests by farmers in Brussels, who demanded that subsidies be maintained for their industry in the days of the summit.


The future unity of the European Union depends largely on overcoming these contradictions, and the fulfillment of ambitious plans depends on the money that will be collected.


The UK's exit from the EU will mean a hole in the European budget of € 10-12 billion a year (or € 75 billion for the period up to 2027). To compensate for these losses, the EU leadership on the eve of the summit announced its budget proposals, which included its increase from 1,067 to 1,074% of pan-European gross national income (GNI). This is a compromise solution, as the previous European Commission back in 2018 stood at 1.1%, while a number of EU leaders were pushing for 1%. In real terms, this is an increase in spending of just 7.5 billion euros, to 1.09 trillion.


This money should go to the Just Transition Fund, which will fund greenhouse gas reduction programs, as well as individual countries, which will have to abandon existing harmful production in favor of environmentally friendly ones. Poland, which consumes a lot of coal, is expected to be the largest recipient of this fund, but is the only country to refuse to support a pan-European climate change strategy.

European Commission President Ursula von der Leyen also announced plans for a major infusion into the EU's digital transformation, where research into artificial intelligence and working with big data should be a priority. The fact is that the EU wants to become involved in global competition in the field of data management, that is, to store them independently and to create a network of data exchange between EU Member States. This should be the answer to the challenges coming from China and the US. According to the European Commission, an artificial intelligence program will require an investment of 20 billion euros.


All these innovations required redistribution on other, traditional, items of the European budget. First of all, it is the Cohesion Fund, which finances countries and regions where GNI per person is below 90% of the EU average. As well as subsidies to European farmers under the Common Agricultural Policy.


At the same time, the European Commission announced a reduction in funding for research and innovation projects, the space program and even the mobility program of the European Armed Forces (minus EUR 1.5 billion). The latter was called a "flagship project" last year in cooperation between the EU and NATO. At the same time, a number of European leaders called for increased military spending, on the one hand, fearing that in the coming years the US would not increase its appropriations for maintaining European security, and on the other - because of the military threat from Russia.


Thus, on the eve of the summit, European leaders did not have a common opinion on the budget, and they met only to set out their national priorities. The head of the European Council, Charles Michel, tried to find a compromise until the last minute.


Countries contributing more than they receive to the EU budget have called for a reduction in the overall budget and a cutback to pan-European support programs for poor countries to make up for the shortfall. They were dubbed the "modest four" - Austria, the Netherlands, Denmark and Sweden. In some matters Germany was in solidarity with them.


Under pressure from these countries, Charles Michel proposed to reduce the budget to 1,069% of GNI. But he also wanted to increase the subsidies to farmers by 2 billion euros to gain the support of a group of countries, which, as a rule, receive more from the European budget than they give him. This group of about ten countries is often referred to as the "friends of cohesion", and this time, Italy, Romania and Portugal have become expressors of its position.


They stated that approaches to green policies and the distribution of the Just Transition Fund infringe on the rights of a number of countries whose economies are dependent on European subsidies. Yes, they do not understand why the European Commission wants to cut support for the fishing industry, considering it detrimental to the continent's ecology. They called for a budget increase of up to 1.3% of the European Union's GNI, stating that otherwise the ambitious programs announced by the European Commission would not be able to be implemented.


As a result, the summit ended without any decision. Ursula von der Leyen said she "sees a long way ahead in order to reach a compromise." Charles Michel tried to look optimistic, saying the discussion turned out to be useful anyway. They say, "we now understand each country's approaches," and "there is still time to work out a solution by the end of this year." At the same time, no date for the new meeting was announced.

European diplomats make cautious predictions that leaders will likely meet for a new "budget" summit in March. But even then, in their view, it is unlikely that a compromise solution will be found. Most likely, the budget battles will be tightened until July, when Germany begins its EU presidency. It is likely that then Berlin will be able to bring closer the positions of different groups within the European Union.


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