German-Polish European BLOG

Talks on the next MFF will be a rough ride for all participants

We have seen it several times before: a draft Multiannual Financial Framework which tries to find the middle ground between the widely diverging preferences of the main players. The net contributors to the budget want to decrease their exposure. The net beneficiaries prefer to keep an unchanged volume of euros flowing in from Brussels. The vested sectoral interests lobby hard for continuity in the MFF. And there are, every time, new challenges and priorities to be included in the accounts. On top of it all, the MFF 2021-2027 will have to accommodate the budgetary consequences of Brexit.

Jan Truszczyński*

Is the Commission’s MFF proposal a good starting point for overall compromise? It looks like it: lots of continuity, new priorities to be financed mainly by new proposed resources, the budget is in real terms only marginally bigger than the present one, the rebates for net payer countries will not disappear overnight but will be gradually phased out. Besides, main contributors – France and Germany – signaled they would be willing to partly fill the budget gap created by UK’s departure. Some of the current net beneficiaries, like Poland, also show readiness to step up their contributions. This should help to soften the present intransigence of those net payers (Sweden, Denmark, the Netherlands, Austria) who do not want to hear about any growth of their payments.

However, expect the talks to be long and acrimonious. At the end of the day, no one is likely to escape the logic of national “net balances”, the only measure of negotiating performance that really counted until now on the domestic scene. Past EU record does not augur well for the growth of certain budget items (innovation, digital, Erasmus+) as proposed by the Commission. The downscaling of proposed spending on new priorities (asylum/migration, external borders, defence) is also probable. Additional uncertainties, like the negotiating posture of the emerging Italian government, will not make the overall task any easier. Hungary throwing around veto threats doesn’t help, either. Make no mistake: it took about 2.5 years to reach compromise on the MFF 2014-2020. There is no factor in play which can generate a higher speed now. So the Commission’s and European Parliament’s appeals to agree on everything before the EU summit in May 2019 are very much political wishful thinking…

How will Poland fare in this environment? First of all, contrary to popular and widely held belief, the content of the MFF proposal does not contain any pitfall or penalty built with Poland specifically in mind. The playing field is level for every Member State. Even the suggested mechanism to protect the EU budget from “generalized deficiencies as regards the rule of law in the Member States”, if it becomes law, does not have to be activated – if the Polish authorities finally go into reverse gear on their unconstitutional actions.

Still, admittedly, there are several challenges and risks that any Polish government would have to address. Here is a short list of key issues.
Spending on innovation and digital is likely to grow, but Polish applicants for such funds were not among those most active and effective. Thus, there is a lot of homework to be done in the next three years, if we aim to see a higher rate of Polish success.

On regional funding, while having many allies to work for softening the decline in overall funds, Poland must expect difficulties in finding a favorable balance weighting the allocation criteria. Some, like Poland, will support the predominance of relative GDP per capita criterion. Others, like Italy or Spain, are likely to wish higher weightings for youth unemployment and integration of migrants. In addition, the Commission’s proposal to increase national co-financing rates may have expensive consequences for Poland, both in regional investment and in rural development.

Access to EMU-related financial tools looks limited for Poland, but there is room for positive action. Firstly, to enable the use of Reform Delivery Tool for national key reforms. Secondly, to go into higher gear on preparations for the euro and in that context to secure access to the Convergence Facility. Thirdly, to also consider joining the European Investment Stabilization Function, where Poland’s contribution would have to be equal to the country’s share in ECB capital (5,12%).

The first Polish impact forecasts on agricultural spending (15% real drop for Poland) seem to be exaggerated. An overwhelming number of farms will not be hit by the capping of direct payments. They, rather, stand to benefit from their further planned convergence to the EU average and from the redistribution of the funds released by capping to small farms.

Finally, Poland must expect a low share in funding from the MFF heading to migration and border management. The bulk of the money to build a much larger standing corps of border guards and to reinforce the Asylum and Migration Fund will go to other countries.

*Jan Truszczyński – Former Permanent Representative of the Republic of Poland to the European Union, Former Deputy Minister of Foreign Affairs