The future of cohesion policy will be at the heart of the forthcoming budget reform debates. The European Commission president has promised not to dismember it, but member states may not necessarily come to the same decision.

The painful financial negotiations will begin in mid-October with the executive’s presentation of a ‘budget review’ guidance document. The text has no specific status but is meant to be a report to member states on possible scenarios for overhauling the structure and functioning of the EU budget on both expenditure and revenue. It is expected to be accompanied by figures, options and simulations. The paper is being drawn up in line with the mandate given to the Commission by the heads of state and government at the European Council, on 15-16 December 2005. Immediately after agreeing on the financial framework for 2007-2013, Europe’s leaders asked the Commission to propose, “in 2008 or 2009,” a comprehensive review of EU expenditure and revenue, including sensitive subjects like the future of the Common Agricultural Policy (CAP) and the British rebate – obtained in 1984 by former Prime Minister Margaret Thatcher to compensate the UK for the high percentage of EU budgetary expenditure spent on the CAP.

POLAND TO TAKE EU HELM

Commission President José Manuel Barroso did not keep to the timetable, partly to prevent complications to ratification of the Lisbon Treaty, in 2008, and partly because of the appointment of his new team the following year. The document will not be presented until October 2010. Budget Commissioner Janusz Lewandowski considers this postponement regrettable because the text will be presented at a time when “attention and effort will already be focused on technical preparation of the post-2013 financial framework”. The Commission is obliged to present its package of proposals no later than June 2011. Parliament, which had called for this budget review, also finds that this is not the best time to publish it. MEPs fear that the text may undermine the debate on the next financial framework in the eye of public opinion by raising the question of new own resources and possible EU taxes.

On cohesion policy, the cabinet of Commissioner Lewandowski explains that the report will propose a “gentle evolution” and not a “revolution”. It will not recommend a drastic reduction in funds for the EU’s least favoured regions or for Europe’s farmers, in contrast with an unofficial Commission document leaked to the press in autumn 2009, which – like the Sapir report six years earlier – called for a renationalisation of two policies: CAP and cohesion. Poland has already made known on several occasions that it will ensure cohesion policy is not cut to ribbons during its EU Presidency in the second half of 2011 when negotiations on the post-2013 financial framework will begin.

During his visit to Brussels, on 1 September, the new Polish President, Bronislaw Komorowski, said after his meeting with Barroso that he wished to “enhance solidarity in the Union”. He referred to the Cohesion Fund as being “very important”. “It is of the utmost importance to keep the existing rules because they allow us to bring living standards closer together.”

BARROSO’S COMMITMENT

Barroso said at the time that he was on the same wavelength as the Polish head of state, noting that he had “no doubts” about the Commission’s position. It will remain “committed to a strong policy of economic, social and territorial cohesion”. Barroso added that he hoped “to be able to count on Poland” to convince its European partners during the negotiations on the next multiannual financial framework.

The talks are likely to be complex. All the issues – whether cohesion, the CAP, own resources or the British rebate – will be linked and be subject to tough bargaining. A majority of member states currently aim to adopt a restrictive approach, arguing that the crisis has damaged their economies and forced them to implement austerity plans. The latest evidence for this is the Council’s decision to cut by €3.6 billion the payment appropriations proposed by the Commission in its 2011 draft budget. The first sector affected by these drastic cuts is cohesion policy, which loses €1 billion. Seven countries, which traditionally argue for a “fair return” on the funds they place in the EU’s coffers, even voted against the Council’s position because they found that the cuts were not deep enough.

Although the negotiations will basically be intergovernmental, the European Parliament will have its say. Unlike member states, it is expected to press for an increase in the EU budget, since the Lisbon Treaty gives the Union more powers and creates new bodies that require new funds.

MEPS’ POSITION

European Social Democrats took a lead in the debate by publishing, last July, a ‘framework document’ on the budget review. The text rejects any renationalisation of the CAP, cohesion or fisheries policies. It even calls for reinforcement of their “consistency” because these common policies are “perfectly integrated at European level” and are “much more effective on a European scale than at member state level”. They can also play a “decisive role in the new development strategy”. These arguments could be echoed in part by the special committee on preparation of the next financial framework (SURE), which will present its report in May 2011, just ahead of the Commission’s proposal.

The Commission will remain “committed to a strong policy of economic, social and territorial cohesion” (José Manuel Barroso)