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European Budget, in search of a Strategy

BLOG - 2 December 2019

Amongst the thorniest subjects that the Brexitian shadow covers, that of the next EU budget is one of the most strategic and most ominous in Brussels. Every seven years, a trajectory is defined by member states with a certain bureaucratic routine in which equation-packed scenarios dominate the field. Yet, this time feels different: political negotiations have rarely been as intense on such topic as Europe’s internal balances have changed. 
 
Four important debates oppose EU member states: 

  1. the budget’s volume for 2021-2027, northern members and Germany advocating a slight reduction while most others and the European Parliament are calling for an increase; 
  2. spending priorities within the budget as old programmes such as territorial cohesion and agricultural funds are challenged by new climate change or security concerns; 
  3. the EU’s own resources to pay for these bills, some member states being resistant to offer Brussels a significant taxation base while others are pushing for an end of the rebates favouring the richest countries
  4. rule of law conditionality, by the support for member states that fail to prevent fraud or corruption would be reviewed.

We believe attempting to simplify  EU budget complexities is important and timely. In a recent exchange of statements, the European Parliament reminded the European Council, in unusual stark terms, that it will not be “forced into accepting a bad agreement due to time pressure” and therefore requires that “the Commission put forward a contingency plan as a safety net” in case a deal cannot be reached before January 1st 2021.
 
Given the new dissemination of forces within the EU Parliament, following the May 2019 elections, the threat seems grounded in correct electoral math. That implies EU governments will have to articulate a clearer vision, a political vision, to justify budgetary ups and downs, and probably bargain with EU representatives even more than during the last round. 
 
These visualisations aim at helping all sides in that discussion, as well as inform EU citizens who wish to understand where their money is going. 

Conclusions 

In our attempt to simplify Europe’s budget complexities, we have identified several insights out of the visualisations above:
 

  • Overall, the new European budget seeks balance in a new fashion. Countries or regions with low economic performances continue to receive extra EU support but the European Commission is guiding member states in two directions: innovation and research, in order to maintain the EU’s business edge and tech autonomy, as well as security and defence, in anticipation of tensions to come in the neighbourhood.
     
  • Accordingly, we have also noticed a general decrease in Cohesion funding – whether regional or social. In spite of regional adjustments, cuts are likely in the North, in the West and in the North-East, while South-East countries (Bulgaria, Romania) and Southern countries (Spain, Italy, Greece) are exceptions to that rule. This is in line with economic difficulties on this part of the continent, as seen with GDP per capita comparative numbers.
     
  • The European Commission proposal for 2021-2027 matches some of the electoral feedback from 2019 European elections : more is done on migration, border management and defence. Yet, little has changed in terms of funding for climate change and the environment, hence the “climate transition”efforts suggested by the new Commission President, Mrs Ursula von der Leyen. Additionally, one may argue that the support for innovation and digital policies, coupled with the decrease of funds for agriculture and fisheries, may widen the divide between small towns and larger urban centres. Regional discrepancies remain a core issue in the EU: the economic gap appears to be increasing between capitals and their regions, despite these welfare adjustments.

No budget proposal is ever perfect. Yet, in our view, the Commission's draft is a fair attempt at adapting to European and global dynamics. Its boldness comes with potential side effects and political headaches though: will budget cuts for North-Eastern countries result in additional strain between East and West? Will new term MEPs, two thirds being unfamiliar with Brussels’ intricacies, have enough time and experience to think this budget’s logic through? Will they be able to find a consensus in such constrained financial and political circumstances, with Brexit still unresolved and no new significant revenues? 
 
European Members of Parliaments appear ready to tackle these issues. Whatever the outcome, it is our belief that the level of the EU’s upcoming budget should match what is now expected from Europe – both at home and abroad. Brussels cannot do more with less.

 

Special thanks to Dhara Shah, Founder Pykih, for the data visualisation support.

 

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