Woman drinking a cappuccino in Berlin, 24 Jan 11Image copyright Getty Images
Image caption Trouble brewing: Soon the EU may cost each citizen more than a coffee

The EU is gearing up for its first major budget battle of the post-Brexit period.

Budget Commissioner Guenther Oettinger will unveil EU plans for the 2021-2027 budget on Wednesday.

Tensions between Europe’s richer countries – which pay more in than they get out – and the poorer countries, which rely on EU funding in order to catch up, look set to sharpen.

So what is at stake?

Deeper pockets needed

The current long term budget, for 2014-2020, represents about 1% of the 28-nation bloc’s total gross national income (GNI).

The Commission says the 1tn (£879bn; $1.2tn) six-year budget is about equal to 440 million EU citizens each buying one cup of coffee a day.

Mr Oettinger says the many demands on the EU now require a budget of between 1.1% and 1.2% of total GNI.

But along with the new resources there will have to be cuts in some areas, he warned.

Why cuts? Because from the end of 2020, under current Brexit plans, the UK will no longer be paying into the EU budget. The ensuing budget hole is likely to be €12-14bn annually.

The UK is among the EU’s biggest net contributors. Taking account of the UK’s £5.6bn (€6.4bn) annual rebate, in 2017 its net contribution to the EU budget was £8.9bn, the House of Commons Library reports.

Where are the battle lines?

There are many – this is the start of months if not years of wrangling. In the end, agreement on the next long-term budget has to be unanimous among the 27 (Brexit UK is not among them).

A political hot potato is the pressure from Germany and some other countries to tie some budget allocations to respect for EU democratic values and rule of law. Hungary and Poland are accused of undermining those values.

States already face fines for violating EU rules, but now there is talk of holding back some budget funds if states undermine free speech and judicial independence.

Any such conditionality in EU payments is likely to be fiercely resisted by Hungary and Poland, who have angered EU partners by refusing to take in refugees and increasing government influence in the media and courts.

Image copyright Getty Images
Image caption German orchard: Farms rely on EU funding but there is pressure for cuts

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The EU is also heading for a clash between countries prepared to increase their budget contributions – notably France and Germany – and those who don’t want to, among them Finland and the Netherlands.

Greece and Italy – the two EU states carrying the heaviest burden of new migrants – hope that more regional funding will come their way, with less going to central and eastern Europe.

The Commission also wants to ease the budget pressure by boosting the national contributions to projects co-funded with the EU. Currently governments typically pay 10% towards projects co-financed with the EU; in future the government contribution could rise to 30%.

Image copyright AFP
Image caption German police paid by the EU helped Greece during the 2015 migrant influx

What is likely to change?

EU officials have already proposed some broad changes to budget priorities. Among them are:

  • A much bigger EU external border force. Mr Oettinger is reported to be considering a five-fold increase in allocations to Frontex, the border agency helping member states to process irregular migrants. From a current staff of 1,600 Frontex would grow to more than 5,000, at an estimated cost of €20-25bn over seven years.
  • Cuts are expected in the two biggest budget areas, accounting for nearly 75% of current EU spending: agriculture and “cohesion” (the latter means funding for poorer regions). The Politico news website says Mr Oettinger plans a 6% cut in each of those two areas.
  • The EU Commission – which drafts and oversees the budget – is seeking extra funding for the digital economy, scientific research and the Erasmus exchange programme for students.

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