Calling out the winners and losers for the EU’s Multi-Annual Financial Framework

On 2 May, the Commission proposed its new budget for the EU, covering the period 2021-27. The draft Multi-annual Financial Framework (MFF) is meant to be a “smart” budget for “sustainable” growth in a “digital” age – one reflecting different priorities for the EU27 after the exit of net contributor UK and Commission President Jean-Claude Juncker’s ambitious plans for the future of Europe.

“The new budget is an opportunity to shape our future as a new, ambitious Union of 27 bound together by solidarity. With today's proposal we have put forward a pragmatic plan for how to do more with less,” he said at the MFF launch. It is “not a neutral accounting exercise” and “has to mirror great ambitions and European solidarity,” he added a few days later in Florence.

Positive reactions within the Brussels bubble included that the proposal represents “an attempt at modernising the budget, within the constraints posed by the existence of strong vested interests in Europe” as Open Europe’s Enea Desideri put it. As such, it has been roundly rubbished by Brussels policy wonks such as Annika Hedberg at the EPC and Jorge Núñez Ferrer/Daniel Gros at CEPS for falling short of its more radical, transformational goals.

Even the headline figures are in dispute. The total volume is €1.28 trillion or an increase of 25 percent, according to think tank Bruegel, while CEPS puts it at €1.14 trillion in today’s (2018) prices.

The battle-lines among the member states are already being drawn in advance of further sector-specific financial programmes from the Commission to be published between 6 and 14 June. The Dutch and their northern allies want to shrink spending substantially; the Poles and Hungarians reject any notion of “conditionality” or linking funding to the rule of law; the French reject any cuts in farm policy.

But what about different sectors of the economy? Which will gain and which will lose? The winners will benefit from an estimated 30 percent leap in funding for research (Horizon Europe) to €100-115bn. The losers will suffer from the proposed five percent cut in spending on the CAP and one of seven percent on cohesion policy.

Pharmaceutical and life science among the winners?

Given budget commissioner Günther Oettinger’s thinking on providing a greater role for industry under Horizon Europe, pharmaceutical and life science groups collaborating with universities and other institutes are likely to benefit from the renewed emphasis on improving/modernising healthcare systems, including the digitalisation of patient records via smart cards, and, say, fighting illnesses associated with an ageing society such as dementia. The industry, which employs more than 700,000, already invests more than €30bn in R&D in Europe.

Will the sustainable energy sector be a winner?

The Commission favours/is revisiting investment in “clusters” for, say, green energy, a quarter of overall spending commitments will be earmarked for fighting climate change, including funds for renewables and energy efficiency. Europe has substantial catch-up to meet in areas such as battery technology and in AI (Artificial Intelligence) as a whole while its proclaimed lead in renewable energy technologies is under constant siege from Asia.

Maybe a loser:  Food and agriculture?

A loser in the package as presented in early May is the food & agriculture sector given the further proposed cuts to the CAP spend that will now be €365bn. But, here, one has to be careful since the Commission claims it is shifting the emphasis of subsidies to small- and medium-sized producers while certain industries in central and eastern Europe, notably the Baltics, will see increased allocations.

The construction industry might be a loser too.

Cuts to cohesion funding – justified by EU officials because of increasing economic convergence – could hit the construction industry, especially in the so-called A10 member states that joined the EU in 2004 and 2007. Co-financing is and always has been a key element in any plans to upgrade local or regional infrastructure. “In our region, the large majority of big companies that have invested substantially in innovations during recent years, have accessed European Structural and Investment Funds to co-finance these projects,” Tomáš Kolárik, director of the regional development agency in Ostrava, Czech Republic, told Politico.

Under pressure: Transport.

Finally, another sector with that could be shaky is transport which has a proposed €30.6b near marked (through the Connecting Europe Facility) but the EU is scheduled to adopt new ways of funding under stricter criteria by 2020. At a recent TEN-T Days event in Ljubljana, Slovenia, a declaration was adopted urging the EU to spend €500bn in the next decade but the sector is anxious that its expectations will not be met when Oettinger announces greater detail on the proposed MFF lines in early June.

All will become clearer the coming days when the financial programmes will be published. Then the Council and Parliament will crown (or not) the winning sector-specific financial programmes hopefully before the elections on 9 May 2019.

Who do you think will be the winners and losers?

 

David Gow is Senior Advisor & Consulting Editor at Acumen, and a journalist since 1968. Former German Correspondent, Industrial Editor and European Business Editor, The Guardian. Senior adviser CabinetDN 2009-17. Now: editor, Social Europe and sceptical.scot. 

 

 

 

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