Czechs seen wary of radical EU budget reform

The European Commission is due to unveil its long term proposal about how big EU funds should be, where they are directed, and which countries will turn out to be the biggest beneficiaries and paymasters. All indications are that dramatic changes are in the pipeline, something that the Czech Republic appears to have reservations about.

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The European Union’s budget accounts for just around 1.0 percent of the grouping’s wealth creation or GDP. But negotiations about how big it should be and who pays in and benefits is guaranteed to spark rows between countries.

This time round, proposals for the looming seven year period from 2021 to 2027, look to be even more inflammatory than usual. Brexit means that one of the biggest contributors will no longer be paying in and that has sparked moves to shake up the whole budget framework.

Petr Zahradník is an economist at one of the biggest Czech banks, Česká Spořitelna, and also a member of the European advisory economic and social committee. This is how he sees the overall changes being proposed:

ʺIt’s not only about the amounts of money but also about the priorities to be financed and also the instruments to be used for financing. From that point of view I think that Brexit is rather a marginal topic but, of course, due to Brexit something like 12 billion euros will be missing from the EU budget or multi-annual framework in the future.ʺ

The squeeze is set to be on the two biggest elements of current EU spending, the farm budget and cohesion funds, aimed at ironing out inequalities between richer and poorer countries and regions within countries.

And there’s expected to be a lot more emphasis on funding projects that have a pan-European dimension rather than benefitting a single country or region.

The overall EU budget could also be upped as well to represent 1.1 or a bit more of EU GDP compared with the current 1.0 percent and much more use could be made of a wider array of financing than simple grants. EU loans or guarantees could make a bigger impact in the future.

Petr Zahradník, photo: Noemi Holeková

After the European Union’s much criticised failure to react to the so called immigrant crisis, a lot more flexibility is also likely to be built into the budget.

Petr Zahradník says the Czech Republic is still likely to get more money out of the EU than it pays in over the future budget period. But he says Prague has shown many reservations about this raft of changes:

ʺI think Czechs at least, the political representatives, rather prefer some status quo or not so radical changes in the concept of the budget. They surely prefer that convergence remains one of the key priorities or targets for future EU financing. That is good, of course, because we are still, in spite of the convergence track record, still an underdeveloped country in the EU context.ʺ

He says one change likely to be introduced now or as negotiations pan out is for EU payments to be tied to respect for basic European values or agreed policies.