The EU budget battle has entered its toughest stage — the fight over numbers.
The Finnish presidency of the Council of the EU on Monday put forward a 51-page proposal for a deal on the bloc’s 2021-2027 budget, including suggested numbers for each spending area.
While the figures are very much subject to change, they’re a significant marker on the direction of negotiations. Talks on a deal that was initially pegged for 2019 have stalled over the past months as EU governments remain far apart in their positions.
Countries like Germany and the Netherlands want a smaller post-Brexit budget focused on new priorities like research and migration. France is leading an alliance to protect spending on agricultural subsidies, while southern and eastern countries are fighting hard to maintain funds for regional development.
In a demonstration of how divided EU capitals remain, hours after the Finnish proposal was circulated to officials and diplomats politicians from across the Continent were already raising concerns.
The Finnish proposal “is not getting [the] EU closer to the compromise in the MFF 2021-2027 to the degree expected by Poland,” the country’s EU Minister Konrad Szymański wrote in a note.
But as 2020 approaches, national capitals are under increasing pressure to make compromises and reach the unanimous agreement needed to allow budget programs to start on time in January 2021. National ambassadors are due to discuss the proposal in Brussels on Wednesday.
Here are POLITICO’s seven takeaways on the budget outline. All numbers are presented in 2018 prices.
1. It’s smaller, but not as small as Germany would like
Finland has moved to reduce the overall budget size by €47 billion compared with the Commission’s May 2018 proposal — a nod to a powerful five-country alliance that is demanding to limit spending in Brussels.
The new proposal would be equivalent to 1.07 percent of the EU27’s Gross National Income — in between the European Commission’s proposal of 1.114 percent and the position of Austria, Denmark, Germany, the Netherlands and Sweden.
But those countries are fighting for a budget much closer to 1 percent, and are sure to continue pushing.
2. Eastern farmers score a victory
The Common Agricultural Policy’s share of the overall EU budget would increase by 2.1 percentage points compared with the Commission’s proposal — partially reversing major cuts proposed by the EU executive from the last seven-year budget period.
However, the 30.7 percent share proposed is still significantly below the 35.4 percent slice that CAP took over the 2014-2020 period.
Two EU diplomats told POLITICO the draft budget increase was linked to a proposal to raise rural development spending.
The proposal also introduces a new formula on so-called external convergence, designed to help even out payments to farmers across the bloc. It guarantees that countries would receive an — as-yet still [X] marked — “€ per hectare” figure by 2027.
One EU national representative said the change had been a “red line” issue for Poland, Slovakia and the Baltic states.
3. So does Horizon Europe
The EU’s research and innovation program Horizon Europe would receive just over €84 billion under the proposal, despite predictions the program would face large reductions.
In the worst-case scenario it’s a small reduction of €2.6 billion compared with the Commission’s plan, which requested just under €86.6 billion in 2018 prices. It’s not yet certain whether the €84 billion amount includes an allocation for the InvestEU program — if it doesn’t, then the proposal is a €522 million increase.
At a technical briefing in November, the Commission’s Director General for Budget Gert-Jan Koopman said that in previous negotiations, programs including Horizon Europe had “essentially paid the price” for overall reductions in spending, because EU governments “fight harder … for cohesion and agriculture than they fight for innovation, research, migration and the like.”
German MEP Christian Ehler last month cited a figure of €12 billion in potential cuts, prompting a redoubling of lobbying efforts by universities and other interest groups to protect the research and innovation budget.
The new proposal suggests that effort didn’t go unnoticed.
4. It’s a big compromise for cohesion — and climate
The Finnish presidency is trying to pitch a middle ground on regional funding — but that area of spending will still see further cuts.
While the share of cohesion spending would rise to 29.7 percent of the budget, compared with 29.1 percent under the Commission’s plan, the overall amount would be reduced by nearly €18 billion due to the smaller total size of the proposed budget.
Poland’s Szymański said that while the country “managed to stop the most severe cuts in the cohesion policy for Poland,” the proposal does not meet all the demands of the so-called Friends of Cohesion — the large alliance made up primarily of eastern and southern countries that is fighting to maintain funding for regional development.
Another EU diplomat said the “cut is getting larger every time,” adding that “we are not supporting that policy that helps achieving our climate goals is reduced even further.” The proposal sets a target to spend 25 percent of the total overall budget on tackling climate change.
“If this proposal becomes reality, we wouldn’t reach the climate goals and [Ursula] von der Leyen’s Green Deal will already be dead before it gets started,” said German Green MEP Rasmus Andresen.
5. Security loses out
The smaller budget size and increases for agriculture spending comes at the cost of many security and neighborhood development programs.
“Money for traditional policies goes up, whilst new ambitions get less money. So is this the budget of a union that strives for more ambition or a union that preserves tradition?” questioned another EU diplomat.
The newly created European Defence Fund was proposed at a size of €11.5 billion, but under the Finnish proposal would be nearly halved to €6 billion. The Internal Security Fund would be cut by over €500 million compared with the Commission’s plan, while the allocation for the Integrated Border Management Fund – originally planned for €8.2 billion — would fall to €5.5 billion.
Funding for the Neighborhood, Development and International Cooperation Instrument and for helping pre-accession countries would also be reduced.
6. Rebates are back
While the Commission proposed phasing out the reductions that Germany, the Netherlands, Austria, Sweden and Denmark currently get when it comes to their contributions to the bloc’s coffers, the matter is still very much up for debate under Finland’s proposal.
The Finnish presidency included a note in the negotiating box that “the current corrections system expires by the end of 2020” but that “possible lump sum reductions 2021-2027” is up for discussion.
The Commission’s proposal to phase out the rebates altogether after the United Kingdom departed was always going to be difficult to sell in a budget process that demands unanimous agreement, meaning every country effectively gets a veto.
An EU diplomat from a net payer country said that rebates would be part of a final deal. “It cannot be up to only a handful of net payers to plug the Brexit budget hole. This is a burden all member states have to shoulder. In short: The final deal will have to include rebates,” the diplomat said.
7. Plastic tax incoming
The Finnish presidency found only two possible new sources of financing are feasible for the bloc. The most firm is a plastics tax, which would take the form of “a national contribution calculations on the weight of non-recycled plastic packaging waste.”
An additional possible source listed in brackets would come from the EU’s Emissions Trading System.
New sources of income — so-called own resources — have been targeted by the European Parliament as an essential component of the budget deal. MEPs will only get a veto over the final agreement, but they see EU income as a way to increase their leverage over spending decisions.
“It seems the Finnish presidency did not focus seriously on the reform of the own resources system, as they are barely mentioned and a lot of issues are still undecided. Only the national contributions are settled, and the method remains unchanged. That is unacceptable to us,” said French MEP Valérie Hayer, a member of La République En Marche.