Friday March 5, 2021
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EU multi-year budget: 'stingy four' will have to dock more

Finland has made a new proposal to break the deadlock around the multi-annual budget (2021-2027) of the European Union. The rotating Finnish Presidency proposes to increase the size of the EU budget to 1.07 percent of the European gross domestic product (GDP). That is less than the European Commission and the European Parliament have asked, but more than some EU countries want to pay.

The proposal is roughly in line with the wishes of the new European Commission (1.11 percent of EU GDP) and the current budget (1.00 percent). Finland cuts 12 percent in the Cohesion Fund to support economically weaker regions. The agricultural budget will also be considerably reduced if it is up to Finland. This budget will be 13 percent smaller.

The 13 percent cut in spending on Agriculture will hit hard with agricultural countries, but were actually already expected and are obvious. Once every seven years, the budget for the common agricultural policy is set, and 7, 14 and 21 years ago there was also a warning that too much EU money goes to agricultural businesses.

The successive elections in several EU countries, the confusion surrounding the Brexit, the ongoing migration crisis and the fear of a possible new financial crisis had put the CAP reform negotiations at an impasse. Now, mid-2021, Brussels is on the agenda as the starting date. That substantial cuts are already being made is a bad sign.

The original proposal of the (old) Commission for the new multi-year budget was already under heavy fire. The trend was: even less money for agriculture (pillar 1) and a further shift to environmental and climate measures (pillar 2) plus possibly a linear reduction of the total agricultural budget by 10 percent. That means a further substantial reduction in income support. The new (Polish) agricultural commissioner Wojciechowski recently wisely kept silent about this during his hearing in the European Parliament, otherwise he could have packed right away.

At 1.07 percent, the Finnish proposal remains above the size of the current budget. This is against the sore legs of four northern EU countries such as the Netherlands and Germany. They believe that the European budget should not grow, but should decrease because of the departure of the United Kingdom. These Member States want to keep the budget at 1 percent of GDP.

With their point of view, those four heads of government are heading for a confrontation with the other EU countries, the European Commission and the European Parliament, who find the tough 1% spending limit unrealistic low.

A disappointment for the 'stingy four', as the letter writers in Brussels are called, is that Germany (the largest lender of the EU) does not sit on the zero border. According to those involved, Federal Chancellor Merkel does not want to put her signature because she finds the 1.00 percent too rigid. She keeps her hands free for a more expensive compromise.

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