Hungarian diplomats told EurActiv that the essence of the problem lies in the Commission’s GDP growth forecasts, which have been put at “unreasonably” low levels for the country.
Such low levels, combined with a “tricky” capping of transfers under cohesion funding of 2.4% of GDP as proposed by Van Rompuy [see paragraph 44 of the ‘negotiating box’], may cost the country more than €7 billion, one source estimated.
Hungary suffered a difficult economic period marked in 2009 by the resignation of the then-Prime Minister Ferenc Gyurcsány. Since then, the country has been put back on track, although the Commission has given Greece a more optimistic growth forecast.
The 2.4% cap was introduced as a measure to limit the cohesion transfers to the largest recipients, Poland and Romania. Under the Commission proposal, the cap was set at 2.5%, but one net contributor even wanted 2%. To maintain cohesion transfers at comparable levels to the previous budget, Hungary would need a cap of 3.5%, which it admits would not be realistic.
The figures of the economic forecasts are contained in a Commission document titled “Macroeconomic assumptions and GNI forecasts”, which is for internal use.
Keeping gains vs. avoiding losses
Poland is the only EU country which has survived the crisis relatively intact, economic figures show, and will keep a healthy cohesion envelope despite the cap. Romania also stands to avoid losing cohesion funding.
Hungary along with Estonia, Latvia and Lithuania saw their GDP growth for 2008-2010 slide into negative territory and are fighting to avoid losses under the cohesion cap. But after some nose-diving in recent years, Estonia, Latvia and Lithuania have caught up, which has been acknowledged by the Commission.
For the remaining Central and Eastern European countries, Slovenia and the Czech Republic have become “rich” and are leaving the category of countries with a GDP per head at 75% of the EU27 average. This leaves Hungary as an unusual case in terms of losses under the Van Rompuy proposal.
“We are the only country which is below 75%, will remain below 75%, and will suffer a substantial detrimental decrease. You will never find another member state with the same configuration of parameters,” a Hungarian diplomat said.
No safety net for poorest regions
“To solve the Hungarian problem, there are two ways. One is in the capping area, and the other is the safety nets. But if you look the safety net paragraph [46 and 47], there are safety nets for transition regions, for more developed regions, but not for least developed regions,” the diplomat said.
The envoy’s reference is to Article 174 of the Treaty on European Union, which says that “the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions”.
Hungary considers that its problem can be solved not by increasing the overall budget, but by a “fair” re-distribution between budget categories, without increasing the overall ceiling of €973 billion.
A diplomat mentioned areas where the budget is due to grow, including ‘Competiveness for Growth and jobs’, ‘Security and Citizenship’, and ‘Global Europe’.
“Our message is – the distribution between headings could be the solution,” he said.
How much is cut?
The Commission’s 2014-2020 budget proposal was €1.025 trillion but has been cut – to €973 billion – under the Van Rompuy plan. The Van Rompuy figure is close to original German demand for cuts at €960 billion. The budget for 2007-2013 was €993 billion in comparable prices.
But the Hungarians say the real figure of cuts should take into account the financing of space-related projects, Galileo, ITER, GMES, which were planned outside the long-term budget but included in the Van Rompuy “negotiating box”.
To this should be added the sums which will be allocated to Croatia, which is due to join the Union on 1 July 2013. Overall, Budapest calculates the reductions add up to nearly €100 billion.
What if no solution is found?
The EU budget “should be manageable” even in an absence of decision, Hungary believes. But Budapest doesn’t see itself as an obstacle to the agreement, with Britain being the most unpredictable player. In the absence of a correction budget for 2012 and of a budget for 2013, the budget for 2011 should apply from 2014 on, indexed with inflation.
Legally that would not pose a problem, with a qualified majority vote in the Council and co-decision with Parliament, but another question is what political problems such a situation would create, a Hungarian official said.
“Somebody formulated that the European Council will develop into an annual budget Council,” he added.
Without suggesting a Hungarian veto, the diplomat hinted that under such a development his country could end up as one of the biggest beneficiaries of such scenario.
The summit starts with bilateral “confessionals” from the morning until 8 p.m., when leaders are scheduled to exchange views with the President of Parliament Martin Schulz. After this, they will have dinner, while Van Rompuy will come up with a revised proposal.
Officials close to Van Rompuy say there is no “plan B” and “the name of the game is to reach agreement”.
“Everybody is unhappy, which means that we are not far from a compromise,” a Council official said.
