The V4 might find some similar topics in the budget negotiations to push for a common position, however, a different political situation will be an obstacle to do so.

It is not clear what are the musical tastes of prime ministers of the Visegrad countries. But in these days and weeks, there might be one song which rings in their ears repeatedly. “Money, money, money / Must be funny/ In the rich man’s world,” are lyrics of famous ABBA hit from 1976.

Czech Prime Minister Andrej Babiš and his colleagues Peter Pellegrini, Mateusz Morawiecki and Viktor Orbán are not alone to be bemused by the old song. All heads of states and governments of the EU member states think about money as the EU summit of 20 February is approaching.

On that day, the current President of the European Council Charles Michel wants to solve the issue of the next EU budget for years 2021-2027.

Gap in finances

There are frantic negotiations behind closed doors about an issue that is a bit more complicated than usual when the seven-year Multiannual Financial Framework (MFF) – as the long-term EU budget is called in Brussels newspeak – is being prepared. Besides the usual things such as support for the common agricultural policy at a similar level or the amount to pay to poorer countries, there is now a new gap in finances created because of the United Kingdom’s departure from the Union.

For countries like the Czech Republic or Poland, it looks like the next EU budget might be the last chance to get some really big money for development. In the future, the V4 countries will be rich enough to balance the payments from the EU by contributions that they send to the common budget.

What are we talking about? The poorer countries – net receivers like all four Visegrad countries – are mainly interested in keeping the recent levels of cohesion funds which are aimed to support the catch-up process with richer members. The European Commission proposed 41.3 billion euros for cohesion funds in the 2021-2027 period. This is down from 63.4 billion of the current 2014-2020 period.

The current EU budget is one per cent of the EU’s Gross National Income (GNI), while the European Commission proposal for the next period is 1,11 per cent of GNI, about 1.1 trillion euros. Because of a hole left by Brexit, Germany wants to have a cap on one per cent and not to be asked together with other net contributors to increase significantly its share.

Bluntly stated refusals

In December, the Finnish presidency of the EU proposed overall cuts in the budget, which was called „unacceptable“ by the group of fifteen countries named the “Friends of Cohesion”. These are countries from the East and the South of the Union who receive more than what they send to the common budget.

According to the European Commission’s proposal, the Czech Republic and Hungary would get 24 per cent less for cohesion policy than in the 2014-20 period, Poland 23 per cent and Slovakia 22 per cent less. Charles Michel was meeting with many prime ministers during January and February to unblock such bluntly stated refusals before all leaders will meet on 20 February.

It is no secret that Germany wants to have a solution for the main question – who will lose the most because of Brexit – before it takes over the EU presidency in July this year. The budget must be agreed before the end of the year and the 20 February summit is the first real round of hard talks about the MFF.

Visegrad countries have one common position: they do not want any cuts. But inside the V4 there are great differences and therefore it is hard to expect a more coordinated approach in those negotiations.

Stark contrasts

The Czech government is opposed to the notion that it will be the European Commission who would set priorities where to spend cohesion money. This is probably the most contrary position within the V4 group. Czech Prime Minister Andrej Babiš speaks about building infrastructure such as highways or speed trains while the others have already done those basic investments or have reached the advanced stages. Instead, they support the European Commission’s priorities concerning more investment in research and development.

Maybe Slovakia might have a similar priority but its government is now in the middle of the electoral campaign and parliamentary elections on 29 February might redraw Slovak political map significantly in any way – both to more pro-European and progressive government as well as towards a Eurosceptical and very nationalistic direction.

When current prime minister Peter Pellegrini talked to Charles Michel about possible cuts, he stressed there are other possibilities than cohesion, such as Erasmus+, defence or administration, where there might be possible cuts. But even if any new Slovak government might have different priorities, it will defend cohesion as such.

There is also a very important aspect of the rule of law connected with the new budget because especially Poland and Hungary refuse the condition that the allocation of money from the new budget will be tied to a rule of law assessment. Both Budapest and Warsaw have open cases with the European Commission concerning the rule of law and its breaches.

Control over money flows

In the light of reports such as the New York Times one about how EU funds are misused by local oligarchs, in the light of Czech Prime Minister case of Stork‘s Nest renewed investigation and alleged misuse of EU money by his company Agrofert, it is understandable that net contributors like Germany want to have much more influence and control over where and how money goes, especially if those „frugal“ countries will have to fill in a hole in the budget left by the United Kingdom.

Within this context, it is interesting how the Hungarian government plays the budget game while being ostracised politically because of its antiliberal and authoritarian policies. Hungary is part of Friends of Cohesion group and there are brawling cases of misuse of the EU funds by the elite.

But at the same time, Hungary follows the European Commission’s proposed priorities. According to the leaked government document published by the Portfolio.hu portal, the highest part of EU funds in the 2021-27 period (26 per cent) would go to innovation and economic development and only the second highest (22 per cent) would go to transport. But because the national highway network is more or less completed and there is an emphasis on clean transport (16 per cent), Hungary might please Brussels with fulfilling cutting emissions programs by new electric vehicles or renewal of trains.

Poland will definitely have a budget negotiation strategy connected with the Green Deal. The Polish economy is highly dependent on energy generated by coal and Warsaw will definitely ask for money as part of the green transition of its energy industry, for a higher proportion than any other member state.

Konrad Szymański

At the same time, Europe minister Konrad Szymanski stated that it is not acceptable to have cuts in the next budget in cohesion and agricultural policies. According to him, money could be taken from other areas, where there is a higher increase, such as defence or research. If this is connected with the rule of law condition, that creates quite a complex issue for the Polish negotiators.

A rich man’s world

Therefore, the V4 might find some similar topics in the budget negotiations to push for a common position, however, a different political situation will be an obstacle to do so. As usual, we will witness a complex negotiations country by country with two new elements: lack of funds because of Brexit and conditionality because of the rule of law disputes.

The lowest common denominator there will be for all who attach themselves to the Friends of Cohesion group: to keep money flowing from the West to the East, to be “funny / In the rich man’s world” with as few as possible conditions attached to them.

Sadly, this is European solidarity as defined by the current governing elites in Central Europe.

 

This article is also available in Slovak in SME.

Martin Ehl is the Chief Analyst at Hospodářské noviny (Economic daily)


Eastern European Futures

In 2009, the European Union and six of its Eastern neighbours launched the Eastern Partnership (EaP) with the stated aim of building a common area of shared democracy, prosperity, stability and increased cooperation. A decade on, however, progress has been mixed.

Visegrad Insight is published by the Res Publica Foundation. This special edition has been prepared in cooperation with the German Marshall Fund of the United States and supported by the International Visegrad Fund.

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