Tomas Janeliūnas. The EU budget – let’s not pretend it’s a victory

Tomas Janeliūnas. The EU budget – let’s not pretend it’s a victory

After rather lengthy negotiations on the EU Multiannual Financial Framework for 2021-2027 (or simply – the EU Budget), upon returning from Brussels, Lithuanian President Gitanas Nausėda received a crown of oak leaves. The poorly directed and reeking of farce greeting is a very symbolic summary of the entire result of the EU budget. Press releases were filled with messages on how fortunate Lithuanian farmers were and that the combined sum of allocated funding should be larger than during the 2014-2020 period. Just that between these optimistic lines there lie numerous less positive news pieces.

The impression arises that in Lithuania, few care about the EU budget. Not to even mention fundamental principles on why the EU budget was shaped as it was by the European Council, there’s not even minimal discussion on what the figures the EU promises Lithuania over the coming 2021-2027 period actually mean.

News portals simply reprint dry numbers out of inertia, ones that were presented by news agencies and the Presidential Palace and then passively repeated the president’s boasts.

The magic of numbers

Perhaps the figures are just too big for us to understand them? Indeed, the combined sum the Presidential Palace indicates is truly impressive – 14.5 billion euro over seven years. And when mention is made that “we were able to negotiate” 1.7 billion euro more as compared to the previous period, then you might think what else could you need?

But for whatever reason, no mention is made that 2.4 billion euro is to be allocated from the newly formed and separate seven-year programme of the EU budget, which is dedicated to cushioning the consequences of the COVID-19 virus. This is urgent money, aimed at revitalising the economy after a rapid decline in 2020. We can only remind that based on European Commission evaluations, the Lithuanian economy will lose almost 8% of its GDP this year. The EU Recovery Fund, which has had 750 billion euro allocated to it, will have to be distributed over the period of 2021-2023 – these are not the standard EU financing spending, but an “instant credit”, which Lithuania will also be receiving.

That said, only half of this funding will have to be returned and the rest will be distributed as subsidies. However, money does not appear out of nowhere. The European Union will have to borrow money for these subsidies and the debt will have to be repaid by all EU citizens via extra taxation to the EU budget. And this taxation, even if small, will be paid over a very, very long time. It is planned that the EU loans taken in the name of the European Commission could last 30-40 years.

But let’s return to the EU budget. As you might have understood, upon subtracting those 2.4 billion euro that Lithuania should receive via the EU Recovery Fund, realistically in the 2021-2027 EU Multiannual Financial Perspective, we will receive 700 million euro less. And by no means does this sound like “an improved negotiation result” than that seen seven years ago. But who cares, we can employ some number magic and combine two separate budgets into one.

Another less than pleasant result of the negotiations is the sum allocated to the closure works of Ignalina [Nuclear Power Plant]. It has been announced that over 2021-2027, the EU will allocate 490 million euro to it. This is far less than Lithuania initially sought. Back in 2019, Lithuania presented a proposal for the EU Financial Framework in 2021-2027 to include 780 million euro in EU funding for the closure works. The European Commission’s initial proposal in response was for 552 million and in the end, we received only 490 million euro A victory? Hardly. We should recall that the full closure of Ignalina NPP (by 2038) will cost around 3.3 billion euro. By the end of 2018, 1.175 billion euro had been spent already (86% of the sum was covered by the EU). Over the next 20 years, another 2.142 billion euro will be needed to fully dismantle the plant. It seems like someone will need to start saving…

Thankful farmers

But then the Lithuanian farmers, in whose name the vice minister of agriculture presented the president with a crown of oak leaves, should be thankful. After all, EU grants for land will be increased! Up to an entire 200 euro per hectare, when this year, this averaged around 170 euro per hectare. That said, Lithuanian farmers will only be receiving those 200 euro from 2022.

But over seven years, this funding will reach an extra 400 million euro, if compared to the previous period. Just will this funding be all that important for Lithuania’s development? Especially knowing that most of this extra 400 million (for a total of around 5 billion euro) will be handed to major landowners. Seemingly coincidentally, Minister of Agriculture Andrius Palionis lifted a restriction this year, which only allowed direct grants to an individual subject to reach no more than 150 thousand euro.

Thus, these billions will land in the pockets of major agricultural companies such as Auga Group or Ramūnas Karbauskis‘ Agrokoncernas, not small and medium-sized farmers. It is hard to imagine how these grants will contribute to any sort of innovative investment, science, development or social welfare.

Meanwhile, grants from the Cohesion Fund, which are directly aimed at reducing the gap between Lithuania and the wealthy EU member states, encourage long term progress and innovation, reduce social exclusion, these will be lowered. In 2014-2020, Lithuania received 6.7 billion euro from the Cohesion Fund. This time, we will receive around 6.2 billion euro. All this because the Lithuanian GDP per capita has slightly exceeded 75% of the EU average and we are no longer perceived as “less developed.” That said, as compensation for the reduction in this funding, Lithuania (and other “harmed” countries) will receive the so-called “emigrants” pay-out of around 180 million euro. A big win? Perhaps an off sort of “bribery” so that we wouldn’t complain quite as loudly.

There might not be any EU budget

It is odd, but around the EU, the news of this supposed victory by European leaders are by no means received with laurel or oak leaf crowns despite the news passing in silence in Lithuania. The European Parliament was very categorical in its evaluation of the European Council’s decisions for the budget and declared that it would not approve the budget if it is not adjusted. And without the approval of the European Parliament, the EU budget cannot exist.

The EP has approved the EU Recovery Fund’s goals and established grants but emphasised that the long-term EU budget for 2021-2027 is contrary to the development goals set by the EU. Furthermore, with the budget being lesser than expected, its distribution also takes distance from the EU’s strategic priorities. According to a resolution from the European Parliament, the most important EU programmes in climate protection, transitioning to digital life, health, youth, culture, scientific research or border control could be significantly reduced and in 2024 (when the Recovery Fund expires), they will be financed less than in 2020.

According to the European Parliament, this poses a threat to the EU’s commitments and priorities. The EP has also emphasised that it will not approve the budget if an agreement is not reached on reforming the EU’s own resource system, including implementing new EU taxes by the end of the 2021-2027 period so as to cover the expenses redistributed via the EU Recovery Programme. The MEPs are also discontent that the European Council essentially “washed out” the links between EU grants and the principles of the rule of law – stricter linkages would have been particularly unappealing to Poland and Hungary.

But in Lithuania, we celebrate without oak leaf crowns and are little concerned over it. We still struggle to understand that the EU budget is also the direction of our future prospects and not only a basket of goodies shared out by Brussels based on rules only it understands.

Taken from

This comment gives the authors opinion, IIRPS VU is not responsible for the content.