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Brussels is to unveil a new way to allocate more than €750bn of EU farming and development funds, shifting the common budget to favour newer member states and those bordering Russia, according to a leaked proposal.
The European Commission on Wednesday will launch its plan for the EU’s next seven-year budget, a proposal for more than €1tn of the bloc’s joint spending that must be agreed unanimously by all 27 member states.
The most radical reform involves bundling hundreds of existing spending programmes — crucially the €392bn for regional development and €387bn for farming under the existing seven-year budget — into one single plan for each nation.
As well as adjusting how the funds are allocated between countries, the approach gives capitals more leeway on spending and allows them to divert resources from areas such as regional development to defence.
“Having one single envelope per member state would ensure the efficient and flexible allocation of funding across policy areas, allowing member states to address new priorities such as defence capabilities or preparedness,” according to the leaked proposal, seen by the Financial Times.
The financial size of each national budget, what the commission calls its “envelope”, would be calculated by a complex new formula that significantly adjusts the criteria for allocating money, the draft said.
This overhauled method changes the distribution of so-called cohesion funds, removing a method of categorising regions by their level of development.
Romy Hansum, a fellow with the Jacques Delors Centre in Berlin, a think-tank, said “poor countries will win more at the expense of those countries that are on average wealthier but have some poorer regions, especially France, and to some extent Spain and Germany”.
In addition, the commission is seeking to close an “agri-prosperity gap” by reducing differences in funding per hectare between older member states and newer ones.
“Countries with large agricultural areas and relatively lower per hectare payment, which is basically all eastern European countries, will benefit the most,” said Hansum.
The changes also mean countries that are large recipients of both regional funds and agricultural subsidies, such as France and Italy, will probably have to sacrifice regional funds because direct agricultural subsidies will be ringfenced.
At the same time, the new system prioritises investment in external security, specifically benefiting countries which have direct external borders with Belarus and Russia — such as the Baltic countries, Poland and Finland — and those handling large numbers of migrant arrivals, including Malta and Greece.
However, this shift of funds to the east is likely to be constrained as each national envelope “cannot be lower than 80 per cent and not be higher than 105 per cent” of EU countries’ current allocation in the budget, the draft reads.
The idea of creating one single envelope for member states has angered current beneficiaries of EU funds, especially local and regional authorities which have been the traditional recipients of cohesion funds.
Kata Tüttő, president of Europe’s Committee of the Regions, an EU body that represents them, told the Financial Times the proposal could end up being “an overly-complicated way to offer a blank cheque to national governments”.
