EU cohesion (division) budget
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
The European Commission (EC) had a busy month in May deciding how to distribute its budget of €330 billion in commitments for 2021 though to 2027. This is handled through its so called ‘Cohesion Policy’.
The goal of the Cohesion Policy is quite a mouthful – “drive up economic and social convergence while helping regions harness fully globalisation and equipping them with the right tools for robust and lasting growth”.
We cannot begin to imagine what goes on behind the scenes but imagine a high degree of ‘horsetrading’. Any decision to redistribute the budget is bound to meet with great resistance and sow division!
Recent reports on proposals point to some politically inspired shifts in the way the budget is to be distributed. Support for Central and Eastern European (CEE) member states remains high but the Commission has decided to recommend shifting over €30bn from them in favour of the EU’s southern states (Greece, Spain, Italy). According to the EC, the southern states are “still lagging behind in terms of growth or income”.
Relative Change in Cohesion Funding from Last EU Budget
Source: European Commission, May 2018
The changes in funding are big but officials say they are being careful to avoid even larger cuts by capping them at a maximum of 24% of the previous amounts. They are also restraining increases, to a limit of 8%. Without the cap and restraints some countries would have seen astounding cuts, some as high as 45%.
While CEE countries are still getting more from the budget in terms of euros per capita, opposition from Poland, Hungary and Czech Republic, who will be seeing less money flowing to them, is hardening. At the same time demands from countries like Spain, Italy and Greece for greater assistance are growing louder.
Cuts and Sizes of Budget Allocations
Source: European Commission, May 2018
With any redistribution there are always winners and losers. In this case it is difficult to avoid concluding that those getting more will want even more and those receiving less will feel extremely aggrieved. Sticking plasters do not work when applied to gaping wounds.
Meanwhile, to try and inspire cohesion, the European Commission released the White Paper showing five scenarios for Europe by 2025. The underlying thinking is that with all 27-member states moving forward together as a Union, all five scenarios are positive. More information on the subject matter is available here.
