In the EU, some countries are first among equals

Money often reflects the fundamentals that drive action, whether by a person or a country.

By Jon Van Housen & Mariella Radaelli

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Published: Sun 8 Dec 2019, 6:00 PM

Last updated: Sun 8 Dec 2019, 8:23 PM

Always follow the money, if you want to get the real story.
Start pulling the interwoven threads of finance and see where they lead, detectives say.
Money often reflects the fundamentals that drive action, whether by a person or a country. In the end it cuts through theory, image and pretense, exposing through our decisions the core of who and what we really are. "Show me the money," says the famous catchphrase from the movie Jerry Maguire. Talk costs little, but real funds come dear.
As she takes her new position as president of the European Commission, veteran German politician Ursula von der Leyen has no doubt been long aware that the real reflection of what will happen is when the cheque book is cracked open and the monies delivered.
She wants a more muscular Europe ready to take on security and climate change. Supported by the newly seated EU parliament, her administration wants to take a leading role in a world challenged by a stumbling US and a rising China. Europe should lead, she says, finding a way through the troubled waters ahead. But it's now time for agreement on writing future cheques, and it requires approval from the 27 individual EU member state countries. After all, they collectively pay for it all in the end. Though scheduled for completion this month, battles over the budget continue and could stretch into next year.
In EU-speak it is known as the Multiannual Financial Framework, which lays out spending over the next seven years, a long time in today's eventful world. It is expected to specify spending on a massive one trillion euros.
The EU traditionally spends about two-thirds of its budget on agricultural subsidies and so-called "cohesion funds", more EU-speak, which funds nation building in less developed member states. In 2018, the last year with full statistics available, Poland, Greece and Portugal were the biggest net recipients of EU funding, with Germany, the UK and France the largest net donors.
And as it pays the most, Germany wants lower spending. One of the so-called 'frugal five' along with the Netherlands, Sweden, Denmark, and Austria, it wants to limit the next seven-year budget to one per cent of the EU's combined gross national income (GNI).
The European Commission led by von der Leyen has itself proposed a budget totaling for 1.11 per cent of GNI and the full parliament went further in approving 1.3 per cent. Finland, which now holds the rotating EU presidency, has stepped in with a negotiating framework to guide discussions that proposes a 1.07 per cent level of spending.
But observers say the Finnish compromise is unlikely to break the stalemate. A leaked position paper from the frugal five warns that "placing an ever-increasing financial burden on a small number of member states will not be acceptable to our citizens." The impending loss of funds from the UK due to Brexit will now cause their share of financing to rise even more disproportionately, says the document. It also calculates those five will finance about half of net payments into the EU budget in 2020, which could rise to three-quarters by the end of 2027.
Then there are the "sacred cows" of member nations that are held dear. France is putting up impassioned resistance to any cuts in agricultural subsidies that aid its farmers. Eastern European countries reliant on cohesion funds are putting up stout defense of their payments.
Clotilde Armand, an EU parliament member from Romania who has been part of negotiations, said cuts to cohesion funding for the east mean the EU is going back on its promises. "The story-rich western EU countries tell themselves is a nice one," said Armand. "That they are generous souls helping out eastern neighbours. But transfers western countries make to the east through the EU budget pale in comparison with the profits western companies make in investments and from exports made in the east."
Von der Leyen has set the battle against climate change as the centrepiece of her administration, but that too is getting push back. The commission wants member states to go carbon neutral by 2050, but wary of the huge impact the goal could have on their economies, Poland, the Czech Republic and Hungary have so far not signed up to the target.
The commission has set aside a transition fund to help countries with the adjustment away from coal power, but central European officials say the cost will be far higher. Officials in Poland, a country that still generates almost 80 per cent of its electricity from coal, estimates that going carbon neutral by 2050 would cost the country ?505 billion. Konrad Szymanski, Poland's Europe minister, warned against diverting funds from areas such as cohesion and agricultural subsidies, which have played a crucial role in helping central European countries catch up with their western peers.
Instead, the new parliament and commission see climate change, military spending, job creation, research and programmes to boost youth opportunities as more crucial to Europe. Yes, follow the money to see what the EU really envisions as its ideal future.
Jon Van Housen and Mariella Radaelli are editors at www.luminosityitalia.com
 


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