Negotiations on the EU Multiannual Financial Framework (2021-2027) may lead to serious tensions between Poland, the European Commission, and Germany deriving from very different approaches to such fundamental issues as the rule of law or the Eurozone.
After its accession to the EU, Poland became the largest beneficiary of the Multiannual Financial Framework in absolute numbers, while Germany remained on the position of the biggest net payer. Germany’s contribution is also the largest proportionally to the size of its economy. On the other hand, taking into consideration the relation of operating budgetary balance proportionally to the GNI (percentage) in 2016, Poland occupied the 9th position among the beneficiaries of the EU budget. The Multiannual Financial Framework (MFF) (2021-2027) proposed by the European Commission a few weeks ago seems considerably less generous for Poland According to the first t EC proposal, the cohesion funds allocated to Poland may be slashed by almost 25 percent and the agriculture subsidies even by 15 percent. Taking the current level of EU funds received by Poland as a point of reference, in absolute numbers it will mean a decrease of almost 25 billion USD.
In fact, the reduction of EU funds transferred to Poland may be even more grave. The Commission also proposed a special mechanism that will make the transfer of EU funds subject to compliance of an EU Member State with the rule of law and assure a “sound financial management”. According to the European Commission, “Only an independent judiciary that upholds the rule of law and legal certainty in all Member States can ultimately guarantee that money from the EU budget is sufficiently protected.” The mechanism would be independent of the Multiannual Financial Framework whose adoption requires a unanimous vote in the European Council. Meanwhile, a qualified majority of 55% is enough to pass it. Member States that represent at least 65% of EU population, and the consent of the European Parliament will have the power to trigger the mechanism. The proposal does not target only net beneficiaries but all EU member states, and it will not be limited to cohesion policy funds. Nevertheless, the devil is in the details. The EC proposed that in the case of suspension of financial transfers for a given Member State, the latter is obliged to pay funds to beneficiaries, e.g. Erasmus students, anyway. This recommendation may be particularly costly for the Polish state budget.
Poland has a strongly negative approach towards the mechanism proposed by the EC. Its position is intertwined with the fact that in December 2017, after two years of futile dialogue, it was placed under a sanctions procedure of Article 7 as the first-ever EU Member State. The EC initiated this procedure against Warsaw because over 13 laws adopted by the Polish government since 2015 had contributed to “the executive and legislative branches have been systematically enabled to politically interfere in the composition, powers, administration and functioning of the judicial branch.” An absolute majority of Poles does not accept the possible EU sanctions against Poland and only slightly more than 40 percent approve of the dialogue with the EC.
Certainly, the final outcome of the negotiations on the MFF remains an open-ended question. Still, these days Poland’s position in the EU seems especially weak. Its criticism of the mechanism linking the EU funds with the rule of law has gained only the support of Hungary. By comparison, during the negotiations on the previous Framework, Poland was able to build broad coalitions with countries from the South and the East. Moreover, Warsaw managed to convince Germany, the biggest net payer to many of its arguments. Today Germany, because of its own totalitarian past, is particularly sensitive to the issue of the rule of law. In consequence, Berlin stands firm behind the EC on the article 7. Moreover, after Brexit, Germany, despite a serious divergence of positions with France concerning the future of Eurozone, became even more committed to the idea of European integration centered around the common currency. Indeed, the proposals of the EC regarding the division of the MFF reflect that shift of power in the EU and the German perception of its future. Again, Poland and Germany are drifting apart. The Polish government and a great majority of Poles reject Poland’s accession to the Eurozone, at least in the medium term.
In fact, the final shape of the MFF may have long–term implications not only forPoland’s economy but also for the approach of the Polish society towards the EU. Currently, Poles strongly support Poland’s membership in the EU. Nevertheless, this positive approach is rather shallow and based to a large degree on commercial calculations. Therefore, in case of a substantial decrease of EU funds allocated to Poland, the Polish government may try to convince its citizens that the EC and Germany should be blamed for that scenario. Most probably, the success of this narrative may considerably weaken the pro-EU stance of the Polish society.
Jan Truszyński in his blog shows that in case of Poland a potential substantial decrease of transfers from the EU budget stems also from the ongoing fundamental change of EU growth strategy. For instance, as he underlines “Spending on innovation and digital is likely to grow, but Polish applicants for such funds were not among those most active and effective.” The conduct of negotiations on the EU budget will be shaped not only by all above-mentioned factors. As Almut Möller rightly points out “the German negotiating position in the coming months will have to be read much more than in the past through the lens of German domestic politics”. In her opinion, “while a solid majority of Germans fundamentally believe EU membership is a good thing, politicians increasingly feel the pressure to explain their choices about core EU policies.”