EU wants big budget to fund new priorities after Brexit

The European Union on Wednesday launched the long and politically fraught process of drawing up its new long-term spending plans seeking a bigger budget to finance new priorities like defence and border control and plug the gap left by Britain’s departure.

The bloc’s executive, the European Commission, unveiled a seven- year spending package from 2021-2027 made up of budget commitments totalling 1.135 trillion euros (US$1.36 trillion), equivalent to around 1.1 per cent of the total output of the 27 member states that will remain after Britain leaves.

European Commission President Jean-claude Juncker said his services “have put forward a pragmatic plan for how to do more with less.”

“The economic wind in our sails gives us some breathing space, but doesn’t shelter us from having to make savings in some areas,” he said.

Spending on big ticket items like agricultural and “cohesion funds” that help bring the infrastructure of poorer members up to standard are both to be cut by around five per cent, with the Commission saying these policies would be “modernized” so they can deliver more with less.

Under the proposal, more money would be injected into security and defence, border management, research, innovation, the internet and high-tech development; a move the EU executive believes will pay dividends in the future.

Concerned by government moves in Poland and Hungary that is considers are undermining their justice systems, the Commission is also seeking powers to suspend or restrict funding to countries whose rule of law standards might pose financial risks.

“We are proposing a new mechanism that allows us to protect the budget from financial risks linked to general deficiencies in the state of rule of law,” Juncker said. He said this “doesn’t target any particular member state, but it is an important aspect of our new budgetary architecture.”

Poland has already slammed the idea.

Brussels wants agreement on the budget before elections to the European Parliament in May next year. Typically, budget debates take several months, with EU lawmakers demanding greater ambition while member states insist on cutting spending at European level. The budget must be approved by all EU member states unanimously and be endorsed by the assembly.

Early signs are that debate this time around could be as arduous as in the past. Spending on some programs was delayed and projects postponed by wrangling over the current package, which runs until 2020.

Europe’s biggest economy, Germany, welcomed the start of the budget debate — if not the Commission’s proposals themselves — by noting that it would have to come up with an average of 10 billion euros each year from 2021, even with a budget of 1 per cent of output.

“We are willing to fulfil our responsibilities for strengthening the European Union, but this also requires a fair burden-sharing of all member states,” Finance Minister Olaf Scholz and Foreign Minister Heiko Mass said Wednesday in a joint statement.

The Commission has estimated that Britain’s departure will cut budget contributions by around 12 billion euros ($14.4 billion) a year. Britain leaves the EU at the end of March 2019, but has agreed to pay its budget share until 2020.

The Commission plans to use Britain’s departure to phase out over five years any rebates that net contributors to the budget receive — Britain’s rebate was significant and hindered past budget negotiations.