Finland has put forward a new proposal to break the deadlock over the European Union’s multiannual financial framework (2021-2027). The rotating Finnish presidency proposes increasing the size of the EU budget to 1.07 percent of the European gross domestic product (GDP). This is less than what the European Commission and the European Parliament have requested, but more than some EU countries want to pay.
The proposal is roughly between the wish of the new European Commission (1.11 percent of the EU GDP) and the current budget (1.00 percent). Finland proposes cutting 12 percent from the Cohesion Funds that support economically weaker regions. The agricultural budget would also be significantly reduced, according to Finland; this budget would be 13 percent smaller.
The 13 percent cut in agricultural spending will be a hard blow for farming countries, but was actually already anticipated and makes sense. Every seven years, the budget for the Common Agricultural Policy is determined, and 7, 14, and 21 years ago warnings were also issued that too much EU money goes to agricultural businesses.
Due to successive elections in several EU countries, the confusion surrounding Brexit, the ongoing migration crisis, and fears of a possible new financial crisis, the negotiations on reforming the CAP had become deadlocked. Now mid-2021 in Brussels is on the agenda as the start date. That there are already considerable cuts signals a negative sign.
The original proposal from the (old) Commission for the new multiannual budget had already come under heavy criticism. The trend has been: even less money for agriculture (pillar 1) and a further shift toward environmental and climate measures (pillar 2), plus possibly a linear reduction of the total agricultural budget by 10 percent. This means a further significant reduction in income support. The new (Polish) Agricultural Commissioner Wojciechowski wisely kept silent on this during his hearing in the European Parliament recently; otherwise, he would have been out of the game immediately.
At 1.07 percent, Finland’s proposal remains above the size of the current budget. This irks four northern EU countries such as the Netherlands and Germany. They argue that the European budget should not grow but rather shrink due to the departure of the United Kingdom. These member states want to keep the budget at 1 percent of GDP.
With their stance, these four leaders are heading for a confrontation with the other EU countries, the European Commission, and the European Parliament, who consider the firm 1 percent spending cap unrealistically low.
A setback for the “frugal four,” as the letter writers in Brussels are called, is that Germany (the EU’s biggest contributor) is not sticking to the zero-growth boundary. According to insiders, Chancellor Merkel does not want to sign because she finds 1.00 percent too rigid. She is keeping her options open for a compromise that ends up costing more.