Poland leads the cheers for new EU budget

By bne IntelliNews February 11, 2013

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Following months of bickering, the EU finally reached an agreement on its 2014-2020 budget on February 8. While the deal sees the bloc's spending drop for the first time ever, the CEE members who led the fight against the cuts managed to protect much of their precious development funding. Some did even better: Polish Prime Minister Donald Tusk went so far as to call it the "one of the happiest days of my life."

The fight over the new budget has pitched net contributors to the west against beneficiaries to the east and south over the past few months, as the big payers insisted that while austerity reigns at state level, the EU budget should reflect that. The eventual solution looks a genuine compromise, protecting the development funds so precious to the likes of Poland and the rest of CEE.

Overall, spending across the next seven years was set at €908.4bn. That represents a 3% drop on the last budget. "Commitments" - the maximum amount of money that can be allotted during the period - was set at €960bn, just below 1% of the bloc's annual GDP.

The headline figure clearly represents a triumph for those large states pushing for a tighter budget. "The agreement is a good agreement as it gives predictability for investors to create growth and jobs," German Chancellor Angela Merkel claimed, according to EurActiv. Jose Manuel Barroso, president of the European Commission, was less effusive, saying that despite the fact that the levels agreed are below those the EU executive considers desirable, the deal remains "an important catalyst for growth and jobs."

France, a rare western proponent for an expanded budget due to high Common Agricultural Policy payments to its farmers, was one of the largest losers, as the biggest ticket in the spending plan was trimmed. "Is this your dream budget? I would say if I were alone, no, it would have been different," French President Francois Hollande said after the summit. The CAP will receive €373.2bn compared with €420.7bn in the 2007-13 budget.

By way of contrast, the level of Cohesion Funds - the second major element in EU spending - actually increased. Distributed amongst poorer member states to help develop infrastructure, the Poles and their allies managed to push the allocation to €325bn, an increase of €4.5bn from proposals laid out last year. Warsaw was seen as a leader of the group of (mostly CEE) states that has been pushing against the cuts to the budget, with cohesion funding their main worry.

Indeed, despite the smaller overall pot, Poland will actually collect more funding over the next seven years, receiving a total of €105.8bn - €72bn in cohesion funds and €28.5bn under CAP. "This is one of the happiest days of my life," Tusk said after the summit broke up, PAP reports. "We received €102bn for the 2007-2013 period and now we are to get €106bn."

Warsaw is pushing to continue the rapid development of infrastructure that started ahead of the Euro 2012 football championships, and has earmarked a new infrastructure fund as its flagship to help stimulate an economy slowing worryingly. This EU budget was particularly important for the country. From 2020, Poland is expected to be a net payer to the EU budget - and not its largest recipient, as it is now - after its economy catches up with EU peers.

Hungary's overall funding through the period will decrease by 10% from the 2006-2013 budget to €20.4bn. However, that's a clear bonus for Budapest, which was facing a cut of up to 30% under earlier drafts of the plan. "The main question," according to analysts at Equilor, "is whether Hungary can utilize EU funds more effectively than it has in the current period."

Despite his insistence on continued harsh austerity at home, Czech Prime Minister Petr Necas was also less enthusiastic for the plan, which dropped his country's funding by €6.2bn to offer it €20.5bn to 2020. Under intense pressure at home, the PM still needed however to attempt to paint it as a victory to a largely euro-sceptic electorate.

"The negotiations were very complicated and I do not deny that they were also very demanding," Necas said, according to CTK, before claiming that his threats ahead of the summit to veto the budget package helped Prague raise its funding levels. "The veto was meaningful," the PM insisted. However, he also had little choice but to praise the tighter spending plan. "A cut has been made... It is really an austerity financial framework."

It's just that which is likely to cause further problems with the agreement this week. "This is a good budget for Poland, but not necessarily for Europe," EU Budget Commissioner Janusz Lewandowski told Polish television on February 9, as he predicted tough negotiations in the European Parliament when it comes to ratifying the budget. "Everyone is eying their neighbours. The Lithuanians show envy about the farming subventions Poland is receiving, the Poles envy Germany. This political envy sometimes outweighs the fiscal vision," the Polish national added, according to dpa.

Certainly, tension is already rising in the parliament over the final deal hammered out, which was based on the latest compromise concocted by European Council President Herman Van Rompuy. "The European Parliament cannot accept today's deal in the European Council as it is. We regret that Van Rompuy did not talk and negotiate with us in the last months," the leaders of the four largest political groups in the parliament said in a statement. "Large gaps between payments and commitments will only store up trouble for the future and not solve existing problems."

"One has to think twice before rejecting this European budget," Van Rompuy warned, "because for the people, for the enterprises, for employment, for youth, for youth employment, for prosperity, the stakes are really high."

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