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Brussels Must Trim €13b From Proposed Budget Increase, EU Capitals Say

More frugal member countries want the Commission to redeploy existing funds to pay for new priorities.

BRUSSELS  EU countries want the Commission to cut at least 20 percent, or around €13 billion, from its proposed midterm budget increase, according to two EU diplomats.

The EU executive had asked in June for €66 billion in additional funds from national capitals to cover unexpected spending, arguing the bloc’s coffers have been depleted by multiple crises, from the pandemic to the war in Ukraine.

But member countries have broadly rejected approving that increase in full, agreeing that the Commission must trim the headline figure by at least 20 percent, according to the diplomats, who like the other diplomat quoted in this piece were granted anonymity to discuss backchannel communications.

“You can’t ask only one group of member states (the net contributors) to make a sacrifice, while another group reaps most of the benefits,” a third diplomat said. “That would undermine a sense of fairness and solidarity in the Union.”

The clock is ticking, because unless countries strike a deal to continue funneling aid to Ukraine, the country risks going bankrupt. Finance Minister Serhiy Marchenko said in early November that Kyiv will need help from the start of 2024 to fill an estimated $29 billion budget shortfall.

The bulk of the extra EU funding, in addition to the continued support for Kyiv (€17 billion in grants, plus €33 billion in non-budget low-interest loans) would pay for higher interest rates on post-pandemic cash (€18.9 billion), according to the Commission’s plan, as well as provide fresh money for migration deals with foreign countries (€15 billion). 

While all EU states except Hungary agree on the need to continue supporting Ukraine, several national capitals are less keen on handing extra money to Brussels for other purposes.

Some Eastern European countries and Northern European members, led by Germany, want the Commission to finance its new priorities by saving cash from other areas of its current budget, which was agreed in 2021. Southern European members, meanwhile, favor the Commission’s proposal. 

Most EU capitals, however, agree that the Commission should lower its proposed €66 billion budget increase. It is broadly agreed that the Commission must identify specific items to cut from its proposed budget top-up, said one of the two EU diplomats who confirmed the backchannel communications.

The Spanish presidency, which has the difficult task of leading the current review of the EU budget, on November 23 proposed three alternative spending cuts from the current framework for 2021-2027 that would save €5 billion, €10 billion and €20 billion respectively, according to a document seen by POLITICO.

The presidency also proposed redeploying €2 billion from a dedicated Brexit fund and from an envelope for workers displaced by globalization.

Northern European countries, however, were disappointed that the Spanish plan excluded cuts to the EU’s agriculture program and cohesion funding — two of its biggest budget expenses.   

“[The Commission and the Spanish presidency] now exclude 2/3 of the budget a priori by saying that cohesion funds and CAP are untouchable,” the third EU diplomat said. “If we really need to save money, we can’t exclude 2/3 of the MFF budget from the scope.”

On the other hand, countries such as Italy that support the Commission’s plan are calling on national capitals to set priorities within the EU’s budget increase before identifying potential redeployments.

EU ambassadors are expected to continue discussing the matter right up until mid-December’s European Council meeting.

Source: Politico