Commission mulls CAP cuts, rebates in effort to shore up post-2020 budget

Faced with a looming gap in the EU’s post-2020 budget caused by Brexit and higher security spending, the Commission is considering cutting funding for farmers, conditioning disbursements on the rule of law in member states and removing rebates once the UK leaves.

The European Commission unveiled its paper on An EU budget fit for tomorrow on Wednesday (28 June), summing up the issue as “a tough challenge to fund more with less”.

Budget Commissioner Günther Oettinger, who presented the paper alongside the Regional Development Commissioner Corina Crețu, said the Commission simply cannot act “business as usual”.

“A large country will be departing. We need to look at shifting expenditures and making cuts,” Oettinger said.

“After 2020 we won’t have the UK with us, they were net contributors so we will have a gap of €10-12 billion per year. The second gap is fresh challenges, defence, border monitoring and protection,” he added.

EU sources have told EURACTIV.com that revamped investments into security, defence and migration may require as much as some € 15 billion per year.

The two Commissioners said the paper was only a platform for discussion, but strategic decisions would have to be taken next year before a new seven-year budget is agreed — although one of the proposals is to shorten the budget period to five years, or ‘5+5’ with a mid-term review.

The proposal to cut spending on the Common Agricultural Policy (CAP) by increasing co-financing from member states is likely to cause an uproar in France, the biggest user of CAP funds, and possibly create trouble for the new President Emmanuel Macron.

In the current 2014-2020 framework the CAP will mobilise around EUR 400 billion to finance market measures and direct payments for farmers, rural development programmes and promotion of sustainable agriculture, the Commission paper said. The bulk, or around 70%, goes into direct payments to farmers, currently financed entirely from the EU budget.

National co-financing

“One option to explore is the introduction of a degree of national co-financing for direct payments in order to sustain the overall levels of current support,” the paper says without elaborating, while Commissioner Crețu told reporters:

“Only agriculture has 100 percent financing. National co-financing could be an option for direct payments, it will be discussed. CAP supports farmers and I’m sure farmers will be happy to receive the money and they don’t care if it is 95% from the Commission and 5% from member states.”

The Commissioners deflected questions on proposals to link disbursement of budget funds with the rule of law in member states — a possible reference to rogue members like the Czech Republic, Poland or Hungary, against which the Commission has recently launched infringements over their refusal to relocate refugees.

The Commission paper reports that there have been “new suggestions in the public debate to link the disbursement of EU budget funds to the state of the rule of law in Member States,” which is important for citizens and investors.

“There is hence a clear relationship between the rule of law and an efficient implementation of the private and public investments supported by the EU budget,” the paper states.

The document also addresses the issue of the rebates, the sum of money sent back to Britain and other net contributors to compensate them for benefiting less from other EU envelopes. The UK rebate is around €6 billion.

“When the UK departs, a major rebate will go. We need to look at other, smaller rebates, ensure that departure of the UK rebate leads to the departure of other rebates,” Oettinger noted.