Daily Management Review

Will EU deprive Eastern Europe of financial support?


04/23/2018


Apparently, Brussels has decided to fight with troublemakers in the European Union, first of all, with Warsaw, Budapest and Prague, with the help of the euro. The Financial Times (FT) reported, referring to its sources in the European Commission (EC), that when preparing the draft budget of the unified Europe for 2021-27, which will be made public in May, it was decided to change direction of the subsidized flows, which are of great importance for the development of small European countries. The new budget will direct tens of billions of euros of subsidies to the south of Europe, primarily, to Spain and Greece. This is a $ 350 billion fund that is spent to support the EU's least developed countries.



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Brussels intends to abandon the usual practice of distributing subsidized money exclusively on the basis of one indicator, GDP per capita. The European officials responsible for the budget want to widen the system of criteria used in distributing financial assistance as broadly as possible, and include everything from youth unemployment and education level to attitude to migration and state of innovation.

Of course, formally it is a pure economy with finances, but it's not a secret for anyone that political considerations in allocating subsidies in the new budget will play an unusually important role. Poland has already warned that tightening the terms of distribution of funds associated with independence of the judiciary system will bring "huge problems" and infringe on Warsaw's sovereign rights.

There is still some time before adoption of the next seven-year budget of the united Europe, but it is already obvious that it is planned to take several tens of billions of subsidized euros from such northern countries as Poland, Hungary, the Czech Republic and the Baltic states, and transfer them to the southern countries: Italy, Spain, Greece and even some regions of France.

"They want to use money against us," the FT cites words of an ambassador of one of the Eastern European countries, which will suffer from budgetary innovations.

After the enlargement of the EU in 2004, the so-called "structural" funds of the European Union were mainly spent on bridging the gap in economic development and living standards between old and new members of a united Europe. Suffice it to say that Poland, the largest beneficiary of the changes of a century and a half ago, received 77 billion of the 350 billion subsidized euros, Hungary - 22 billion, Slovakia - 14 billion.

Brussels want to revise the rules for financing infrastructure projects by EU members. It is supposed to increase the share of "national" money in it.

The budget reform implies not only redistribution of subsidized flows, but also reduction of subsidies in general, mainly in order to plug the budget hole that Brexit is forming now. According to Günther Oettinger, the European Commissioner for the Digital Economy and Society responsible for the EU budget, it is necessary to reduce the structural funds by 5-10%.

The shift of attention to the south of the continent is quite understandable from the point of view of the economy. With the adoption of the last budget in 2013, the southern countries have suffered serious losses in relative terms. Countries such as Spain and Greece have cut funds nearly by 30%. 

European heavyweights support budget reform. Berlin and Paris will push the new EU budget through. Angela Merkel and Emmanuel Macron have already spoken out for increasing subsidies to countries and regions that receive tens of thousands of migrants from Asia and Africa. In addition to Spain, Italy and Greece, it is proposed to include Sweden in the list. Recall that the new members of the European Union categorically refuse to accept migrants.  

source: ft.com






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