EU budget battleground: here are the coalitions

The stakes can hardly be higher, as EU leaders are meeting today to kick off a negotiating marathon to decide on the next Multiannual Financial Framework of the EU. Finding an agreement will be more difficult than ever, as the increasing political fragmentation and polarization of political systems across the EU decrease the room for maneuver of the different national leaders. 

Key sticking points are not only the size of the budget and how it should be collected, but also the various types of conditionality, which will determine where the money actually ends up. The richer countries are particularly keen on the rule of law criteria, which would allow them (and Brussels) to supervise the judicial reforms of the recipient countries. From another angle, Central and Eastern European (CEE) and Nordic countries are keener on the conditionalities based on macroeconomic stability, something that bigger (but troubled) Western countries like France or Italy are less happy about. Lastly, the green conditionality is played differently:  North-Western (frugal) states fancy more money to go to projects that are environmentally-friendly, but oppose the plan to allocate a large part of this money to fund “Just Transition” projects in the poorest countries that cannot afford to fund a faster transition in the energy mix on their own. 

VoteWatch Europe created precise mappings of the positions of the different national groups on the hottest topics on the EU budgetary agenda: the size of the EU budget, linking EU funding with rule of law and structural reforms, and the latest proposals to make the EU budget ‘greener’. This assessment is based on the observation of the the actual positions of the parties coming from across the continent when voting on these subjects in Brussels and Strasbourg (rather than mere statements).

Need further analyses? Feel free to send your inquiries to VoteWatch Europe. We provide tailored research, presentations or training on MEPs’ and European governments’ likely positions and majority building in specific areas. If interested, send us an email ([email protected]) or give us a call (+32 2 318 11 88).

Bigger MFF: Swedish are the most opposed, followed by the Dutch

A lot of attention is clearly being paid to the headline numbers, in particular Charles Michel’s latest proposal of setting the next MFF at 1.07% of GNI. While this proposal is higher than the frugal Member States’ red line of 1%, this is far lower than the demand by a large majority of Members of the European Parliament (69%) to set the next MFF at 1.3%. While the final outcome of the MFF negotiations is rather likely to disappoint the most ambitious MEPs, our mapping of the positions within the European Parliament can help us to shed light on the positions of the different national groups.

Note: for the time being we keep the UK in our mapping to highlight who is losing allies after the departure of the British.

As shown by the map above, strong support for a big increase in the EU budget is found across CEE politicians (with the exception of the Czech), and Iberian countries. The lower level of support by French and, especially, Italian politicians is due to the strong weight of the delegations of Lega and Rassemblement National after the EU elections. However, since these two countries are net contributors to the EU budget, the nationalist opposition to a bigger EU budget should not come as a surprise. Interestingly, German MEPs are rather supportive, on average, of bigger contributions to the EU budget. The support of CDU MEPs for a bigger MFF helped us predict that the German government’s  opposition to increasing budgetary contributions was not as strong as it seemed (in fact, Germany was one of the first to ditch the red line on budgetary increases from among the frugal countries). Conversely, the opposition of Danish, Dutch and, especially, Swedish members seem to be more solid and rather widespread across the different political forces from these countries.

Debate on budgetary conditionality provides net contributors with leverage on other countries’ domestic policies

In order to avoid getting stuck on debating the headline size of the budget, the discussion ultimately shifts to how the budget will be spent and what conditions will be attached to EU budgetary allocation. In particular, the debate on conditionality allows the biggest contributors to gain stronger influence on the net receivers, as clearly highlighted by the debate on rule of law conditionality. 

Rule of law conditionality:

While proposals to link EU funding to an assessment of the rule of law conditions are supported by most politicians from Western and Northern Europe, such initiatives are met with strong opposition in CEE, which are resisting the current efforts to increase EU supervision of the national judiciary systems. However, our assessment of the previous decisions indicate that CEE politicians are divided on the matter: while strong opposition to such link is found among Hungarian, Croatian and Polish policymakers, Romanians and Latvian politicians tend to be more supportive. 

Macroeconomic conditionality:

The biggest net contributors are also keen on linking the allocation of EU budget with the implementation of structural reforms. Similarly to the above proposal, this is also another way the EU budget can be used to influence domestic policies of Member States, in particular as compliance with economic governance mechanisms is becoming more difficult to enforce in an increasing unstable political environment. This conditionality  draws the support of policymakers from CEE, who are less concerned by such requirements, while generated a stronger backlash among Southern European politicians, in particular the Cypriot, the Maltese and the Italians. Interestingly, none of the policymakers from Cyprus support such link, showing an absolute opposition of the islanders to EU pressure on economic reforms.  

Green conditionality:

The biggest disputes are related to the current proposals to make the EU budget greener, as in practice budgetary mainstreaming of climate action comes in many shapes and forms.

For instance, the current proposals to turn the EIB into an ‘European Climate Bank’, which would, among others, phase out financial support for gas infrastructural projects is leading to a split between CEE and North-Western Member States, while Southern policymakers have more nuanced positions. The strongest opposition to phasing out support for gas infrastructure comes from Bulgarian, Slovak and Polish politicians, while the strongest support is found among the Portuguese and the Irish. 

CEE countries opposed, for many years, a faster transition in the energy mix towards renewables, as they are in a different state of economic development and lack the resources to fund such a fast transition. Acknowledging the disparity and willing to put the richer and poorer countries on an equal-playing fiend, the Commission has come up with the Just Transition Mechanism, which also involves giving a mandate to the EIB to lend money to finance climate-friendly projects in the countries that cannot afford to do so.  However, not all the policy-makers from the richer countries are enthusiastic about this plan: the Dutch, Danish and Finnish are the staunchest opponents to a proposal to allocate 75% of the value of the EIB’s funds from the “just transition mechanism” to the poorest Member States. These national groups are clearly going to miss the British, who were observed as the biggest opponents of this proposal.  Unsurprisingly, the Romanians, Polish and Bulgarians are the most enthusiastic of this plan, as the mapping of the MEPs’ positions below reveals. 

Need further analyses? Feel free to send your inquiries to VoteWatch Europe. We provide tailored research, presentations or training on MEPs’ and European governments’ likely positions and majority building in specific areas. If interested, send us an email ([email protected]) or give us a call (+32 2 318 11 88).

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