The budget battle – Why EU regions are against the next EU budget proposals

Over the past months, one specific topic has triggered lively discussions in Brussels and elsewhere in Europe: the Multiannual Financial Framework (MFF). The MFF is the seven-year period EU budget that sets ex ante expenditure ceilings for all the headings. At the time of writing, no agreement for the 2021-2027 period has been reached yet. The EU’s next long-term budget, however, will certainly be characterised by new features regarding size, categories of expenditure, and allocation criteria. This makes it difficult to reach a compromise among European Member States, crucial players in the negotiation process alongside the Commission and the European Parliament.

In the past, MFF negotiations have predominantly shown an intergovernmental nature, with national interests playing an essential role in determining the final decision. Besides national governments, EU regions have also raised their voice and largely criticised the plans which have arrived at the table since the Commission’s proposal of May 2018. Overall, EU’s local and regional politicians representing their cities and regions at the European Committee of the Regions have expressed their opinion in favour of a more ambitious budget. But why do EU regions dislike the MFF packages which have so far been proposed? Followingly, four main reasons are reported.

1. Asking for a bigger pie

Local and regional authorities from all over the EU have no doubt: The next long-term EU budget should amount to at least 1.3% of the EU’s gross national income (GNI). This would allow to secure a budget that meets the needs and expectations of EU citizens. Nevertheless, Member States do not seem to be ready to contribute so much to the budget. Particularly, Austria, Denmark, the Netherlands and Sweden have pushed for keeping the budget at 1% of EU27 GNI. The efforts of the European Council President Charles Michel, suggesting 1.074% of EU27 GNI, failed at the extraordinary EU Summit of February 2020. A bigger pie is therefore likely to remain an unachievable goal for EU’s local leaders.

2. Asking for a bigger slice of the pie

The proposed cuts to cohesion policy have generated a bad sentiment among the members of the European Committee of the Regions. Cohesion policy aims at strengthening social, economic, and territorial cohesion and reducing regional inequalities. This goal, however, is far from being met. For instance, in several EU countries there are still a lot of discrepancies among regions. Moreover, in countries like Portugal, Croatia and Lithuania, EU cohesion funding is so essential that it constituted more than two-thirds of their total public investment between 2015 and 2017. The proposed amount of cohesion funds presented by the Finnish Presidency in December 2019, and recently also adopted in President Michel’s proposal, foresees a cut of more than 55 billion euros compared to that of the current period. The reduction is substantial, and it would lead to a turbulent future for cohesion policy. Regions are thus likely to receive an even smaller slice of the pie.

3. More guests require an even bigger pie

New challenges have shifted the spending from more traditional policy areas, such as agricultural and cohesion policies, to new categories in line with the current political priorities. This is the case, among others, of environment and climate policy. Despite recognising the importance of tackling climate change, for instance, EU’s local leaders strongly oppose taking money from the cohesion envelope to finance new spending areas. In other words, EU regions believe that new priorities are to be financed with new appropriations. Nevertheless, it seems that the small pie will have to be divided into more slices to accommodate the new entries.

4. An unfair diet

The European Commission and some Member States have been pushing to put in place some mechanisms to link EU funds to rule of law criteria to ensure respect for this EU’s fundamental value. Local and regional authorities across Europe, however, have not welcomed the proposal of the rule of law conditionality. They claim that an action against a Member State would ultimately limit regions and cities’ access to funding. In this way, by punishing the misbehaviour of a central government, the EU would de facto impose restrictions on subnational authorities. As a result, regions of some specific countries might start starving soon.

Overall, local and regional authorities implement nearly 70% of EU legislation. Therefore, their voice needs to be taken into consideration when making important decisions. Despite acknowledging the importance of financing the green transition or the management of migration-related challenges, it is vital to continue to support pre-existing sectors, such as cohesion and agricultural policies. In the end, how can the EU ask farmers to comply with new rules in favour of a more environmentally sustainable, modern and competitive agriculture if EU funds for farmers are significantly reduced?

Alessia Setti is a young professional in the field of European affairs. She holds an M.A. in European Studies, with specialisation in European Public Policy and Administration. She is passionate about politics, cross-border cooperation, foreign languages, and food. No matter what the question is, for her, pizza is always the answer!