Top 5 EU budget tricks
Welcome to the numbers war.
As Brussels prepares to enter the tunnel of the European Council budget summit, national diplomats are frantically presenting their version of the figures to sway a final deal.
Once they have an agreement, leaders need to go home with something in hand, a sign that they fought hard and won concessions on behalf of their country. Oftentimes this involves creative solutions.
Here is POLITICO’s guide to five budget tricks likely to make an appearance.
1. Double counting
The U.K.’s exit from the bloc has left funds scarce — so renaming and repackaging will be essential for governments to claim wins.
The Commission’s proposal included great examples. The Common Agricultural Policy was cut hugely but €10 billion of the Horizon Europe research program was split out as a line item for agricultural R&D — then celebrated as money for both the research and agriculture camps.
The new Just Transition Fund could meet a similar fate. Designed to help regions transition to greener economies, it is being used to help win the support of eastern and southern member countries upset about proposed cuts to cohesion policy. But in European Council President Charles Michel’s latest plan, the €7.5 billion is located under heading 3 — for national resources and the environment.
2. Shifting programs outside
Leaders can artificially make EU spending look smaller by placing programs outside the formal 2021-2027 Multiannual Financial Framework.
The current EU budget, running from 2014 until 2020, is officially sized at 1 percent of gross national income of the 28 countries covered. But the European Development Fund, worth 0.03 percent of GNI, is outside the budget and governments finance it separately. Leaders can boast of a budget of 1 percent of GNI when in reality they are spending at least 1.03 percent (a small but significant difference).
While the Commission proposed integrating the European Development Fund into the 2021-2027 budget, negotiators may take it out again to celebrate a lower overall budget size to the public.
Michel also proposed a way to raise €500 billion in investments for climate change and digitalization without adding to the budget size. His plan is to increase capital for the European Investment Bank; EIB contributions don’t count toward a country’s EU budget contribution.
3. Getting creative on contributions
How much countries actually benefit from the EU budget is the subject of creative interpretations.
Take the Netherlands: a wealthy country that gets relatively little EU agriculture and cohesion funding, and says its national contributions far exceed what it gets back. But the European Commission estimates that while Netherlands would contribute €6.85 billion per year under its 2021-2027 plan, the country’s benefits from being in the EU single market are €84.02 billion per year.
Some poorer countries argue they are not true net recipients. “The money western countries send to Eastern Europe through the EU budget pales in comparison with the profits western companies make from investments in the East,” Romanian MEP Clotilde Armand wrote last year.
The Hungarian government, one of the bigger beneficiaries of EU funds, is currently making the case that it is a “quasi net contributor” due to the outflow of profits and capital.
4. Inflating figures
One euro of spending in 2020 is not equal to one euro in 2027, and EU budgets use a fixed 2 percent annual deflator in long-term planning. But with two sets of figures, inflation-adjusted or nominal, that allows countries to pick and choose how to portray numbers to voters.
The Commission’s proposal would spend €373 billion on cohesion policy programs for 2021-2027 including inflation, a 3 percent increase compared with estimated EU27 spending in the current budget. But in 2018 prices, that amounts to €330.6 billion, a 10 percent cut.
And when the Commission presented its proposal, it proudly announced that it would boost the popular Erasmus student exchange program to €30 billion. But in constant 2018 prices, Erasmus will only get €26 billion.
5. Including customs
Countries collect customs duties on behalf of the EU, retaining a portion to cover costs. But some governments, especially those with big ports along the EU’s borders, present their contribution to the EU budget including these customs revenues.
That changes the optics. Germany, the biggest collector of duties and levies into the EU budget, is set to transfer duties of about €4.85 billion per year to the EU in 2021-2027, while the second-biggest collector, the Netherlands, would transfer an estimated €3.07 billion annually, according to Commission figures.
This article is part of POLITICO’s coverage of the EU budget, tracking the development of the seven-year Multiannual Financial Framework. For a complimentary trial, email firstname.lastname@example.org mentioning Budget.
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