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23/07/2016

Countries frown at German ‘blood, sweat and tears’ plan

EU Priorities 2020

Countries frown at German ‘blood, sweat and tears’ plan

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Most countries appear to dislike Germany’s “better spending” proposal for the 2014-2020 EU budget, EurActiv has learned. The proposal, described by a diplomat as “blood, sweat and tears”, was tabled at a recent meeting of European affairs ministers in Nicosia.

The six-page document titled “More growth through better spending: four challenges”, provides a series of hurdles for cash-strapped countries to access EU funds.

For example, it plans to eliminate the “bonus financing” for countries under bailout programmes.

Last year, the European Commission decided to lower the proportion by which EU-sponsored projects require co-financing to help Greece, Ireland, Portugal, Romania, Latvia and Hungary, which have all benefited from different forms of bailouts in recent years.

Under EU rules, member countries have to provide at least 15% of the funding of EU-sponsored projects from their own budget. Under the Commission proposal, the EU contribution could be increased to a maximum of 95% if requested by one of the countries concerned.

But the German paper says that in the new Multiannual Financial Framework (jargon for the long-term EU budget), the rules for financing will return to the “pre-crisis status”.

“Only an adequate level of co-financing by member states guarantees the necessary prioritization of cohesion policy projects,” the document says.

No money for countries in deficit

The paper also sets a few hurdles to access EU funding for countries with excessive deficits. Under the provisions of the Stability and Growth Pact, EU countries agree to respect two criteria: a deficit-to-GDP ratio of 3% and a debt-to-GDP ratio of 60%. At present, 19 member countries do not respect these criteria and have been given deadlines to correct the imbalances.

The German paper says “all funds from the Common strategic framework must be taken into account when it comes to sanctioning member states which have failed to comply with the guidelines set forth for the surveying of fiscal and economic policies”.

It adds that “this applies in particular to those cases in which a member state is subject to a macroeconomic Excessive Imbalance Procedure, has to reduce its excessive deficit, has failed to take measures to implement adjustment programmes or is not complying with the conditions attached to ESM financial assistance”. The European Stability Mechanism has still not entered into force, pending a crunch decision of the German Constitutional court on 12 September.

Loans instead of grants

Loans instead of grants should be used “in suitable areas and with a precisely calculated risk for the EU budget,” the paper says.

The “better spending” plan calls for introducing more reviews before funding begins. An ex-ante review by the Commission should be institutionalised not only at programme level, but also at project level, it says. In addition, an impact assessment is intended to monitor adherence to ex-ante conditions. “It must be possible to hold back funds on a permanent basis if target agreements are not met,” the document says.

Oversight and sanctions

Several texts provide for strengthening the powers of the EU institutions for freezing funding in case of non-compliance. The Commission must be granted greater options for intervention and the Council must assume responsibility for redirecting funds when problems have been detected, it says. OLAF, the EU’s anti-fraud office, should be given bigger role, including in “reviewing” concrete projects.

Before the evaluation of concrete projects, Berlin would like to introduce a system through which “external players” from academia and civil society would evaluate programmes and projects. “The evaluations should be submitted not only to the Commission, but also to the Council and, when necessary, to the European Council,” the document says.

According to the blueprint, the Commission is tasked to submit regular reports, so that the EU heads of state and government would examine each year whether the goals of the EU funding were really achieved. “If necessary, it must be possible to take appropriate action,” the paper says.

A spoonful of sugar

To make the medicine go down, the German plan is accompanied by rhetoric favouring growth and employment. However, growth-promoting measures appear to be accompanied by more paperwork. “In future, every recipient region must submit a growth strategy … translated into operational programmes and demonstrate that the funds have been concentrated on growth-relevant measures,” it says.

A paragraph is devoted to investment in the education sector, where “fixed quotas” are proposed to be set, which must be adhered to by every member state. Funding for education should come both from the structural funding and other headings of the EU budget, it says. A map of European locations for education could form the basis of decisions to allocating funds, Berlin says.

Background

The European Commission presented on 29 June 2011 its proposals for the EU's 2014-2020 budget – the so-called Multi-Annual Financial Framework.

The Commission proposed raising the next budget to €1.025 trillion, up from the current €976 billion. This represents a 4.8% increase, which is beyond the average 2% inflation recorded in the last decade.

The goal of the Cypriot presidency is to reach an agreement by the end of 2012, in line with the European Council conclusions of June 2012 [more].

Timeline

  • 18-19 Oct.: European Summit to discuss economic governance
  • 22-23 Nov.: European Summit to discuss long-term EU budget for 2014-2020
  • 13 Dec.: European Summit expected to agree on 2014-2020 budget

Further Reading