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The Warsaw Voice » Business » July 29, 2011
Business & Economy
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New Draft EU Budget
July 29, 2011   
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Poland is likely to remain the biggest beneficiary of European Union funds under the bloc’s new long-term budget for 2014-2020 proposed by the European Commission at the end of June.

The proposed budget totals 971.5 billion euros in payments and 1.025 trillion euros in commitments, up by 5 percent from the previous budget period.

The proposed budget prioritizes economic growth and new jobs, which will dominate the EU’s spending along with the Europa 2020 strategy. The goal will be for the EU to overcome the economic crisis and enter a path of sustained economic growth.

According to European Commission President José Manuel Barroso, the Commission has proposed an “innovative, ambitious, but at the same time responsible” budget to member states, which have a combined population of 500 million.

Janusz Lewandowski, the EU budget commissioner, said the proposed budget was realistic and acceptable for all member states, including net contributors. “This is a stop on a road that is good for Europe, including the poorer Europe,” Lewandowski told journalists.

The proposed budget assigns 376 billion euros to the cohesion policy, up from 350 billion in 2007-2013. Poland is expected to receive 80 billion euros of the amount, becoming the largest beneficiary again. The present long-term budget awards 68 billion euros to Poland under the cohesion policy in 2007-2013.

At the same time, the European Commission, the EU’s executive, proposed the establishment of a special category of “transition regions” eligible for continued support under the cohesion policy. The proposal mainly concerns regions in wealthier EU member states which will soon lose the right to benefit from the cohesion fund. These include a number of regions in Spain, Greece and Portugal, but also several regions in the former East Germany. Under the Commission’s proposal, transition regions would receive 66 percent of the support granted to the poorest regions in the EU.

The European Commission also proposed that countries struggling with macroeconomic problems be allowed to decrease their level of co-financing for EU projects, an opportunity that Greece is sure to take. Member states will also be able to obtain financing from a new supraregional Infrastructure Fund totaling 40 billion euros with an extra 10 billion from the cohesion fund. This new instrument is mainly designed to finance energy- and transportation-related projects, with funds available to both old and new member states. The cohesion policy, on the other hand, primarily aims to support developing new EU member states.

The Commission’s budget proposal earmarks 281 billion euros for the Common Agricultural Policy—around 35 percent of the EU’s total spending, down from the present 40 percent. The proposal freezes EU spending on the agricultural policy, as outlays on agriculture have been consistently downsized and will continue to decrease until the end of the current financial perspective in 2013. The European Commission has proposed to reduce the discrepancies between direct payments for farmers, which range from 95 euros per hectare in Latvia to 460 euros in Belgium. The plan for Poland is to increase the payments every year after 2014 so they grow 30 euros by 2020 and gradually approach the EU average.

In its budget proposal, the European Commission wants to increase funds available for research and innovation (80 billion euros) and education (15.2 billion). Around 70.2 billion euros has been assigned to foreign policy and 16 billion euros to the neighborhood policy. The Commission proposed that contributions which member states make to the common budget consist in part of a tax levied on financial transactions and in part of member states’ revenues from the VAT tax, but without an increase in VAT rates. That way the national contributions could be reduced.

Nobody can tell what will remain of the Commission’s proposals after budget negotiations with EU member states, and the negotiations will not be completed until a year from now.

Elżbieta Bieńkowska, Poland’s minister of regional development, said that what the European Commission has published is just a draft budget. “There is a long and winding road ahead of us, spanning three EU presidencies until the end of 2012,” Bieńkowska said. “That is when we the budget will be released in the version we are going to get afterwards.”

Jerzy Kwieciński, an expert on regional development with the Business Centre Club, a Polish business association, says the new draft EU budget for 2014-2020 is a reasonable, responsible and realistic proposal for both the EU and Poland, especially given the present situation in the EU and beyond.

“Poland is mostly interested in the cohesion policy, as structural funds have clearly helped Poland change and develop,” Kwieciński said. “Almost one-fifth of the funds are being transferred to Poland at present. We will remain the largest beneficiary of the cohesion policy and that is good news for Poland, as in the coming years we will still need EU support to continue modernizing the country and improving its competitiveness.”

The proposed budget is likely to be amended after negotiations and so it will be important to Poland to make sure that the final version is as close as possible to the one proposed by the European Commission, Kwieciński said. He added that Poland should back the European Commission and stand up for the budget as currently proposed.

“Realistically speaking, we can expect that the budget will be supported by new member states and Greece, Portugal and Spain,” Kwieciński said. “These countries have been utilizing EU funds the most. On the other hand, Britain, the Netherlands and Germany will probably be the staunchest opponents of the proposal.”

Britain and the Netherlands have previously demanded that the new EU budget be downsized radically. Sweden, Denmark, France, Austria and Finland are likely to negotiate for the budget to be frozen. Given the crisis in the eurozone and the urge to seek savings, these are bound to be tough budget negotiations.
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