European Trade Union Institute, ETUI.

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26 September 2018

Experts tell ETUI seminar to expect tough choices in the next EU budget cycle

Against a backdrop of Brexit, the lingering effects of austerity and the rise of populism, the ETUI this week hosted an expert seminar on the European Commission’s proposals for the coming EU budget. The audience at the event was warned to expect difficult negotiations over national contributions and spending allocations. With little prospect of extra funding being made available to advance a more social Europe, trade unions would need to push to preserve and improve what is already in place.

The new Multi-annual Financial Framework (MFF) for 2021 to 2027 lays down the common European budget policy and reflects the EU’s policy priorities. Although representing only around 1% of EU GDP compared with, for example, around 20% for the Federal Budget in the USA, the MFF is of crucial importance for disbursement of Cohesion spending, and training and social policies in Europe.

Iain Begg, a Professor at the London School of Economics and author of a recent ETUI Policy Brief on the topic, warned the audience not to expect big changes from the MFF because of the reluctance of net contributors to the EU budget to pay more and the determination of net beneficiaries not to receive less. Brexit, he said, will make matters worse because it will remove, in the worst case, €10-12bn of revenue annually from the EU’s c.€140bn budget. On the other hand, the more amicable divorce that is still possible could see the UK continue making contributions well into the next funding cycle.  

Behind the negotiations, however, Begg said that momentum may be building for reforms to EU governance with more prominence given to the social dimension, and he suggested that the European Social Fund might be in line to get its own authority. To bring revenues back into line with expenditure following Brexit, the Commission may seek to levy more taxes directly and some subsidies could be replaced by loans. He also expected a greater emphasis to be placed on ‘conditionality’ in the MFF. The Commission may attach more ‘strings’ to the Cohesion budget to bring errant countries into line in response to clashes over migration and internal governance.

László Andor, of Corvinus University in Budapest and a former EU Commissioner for Employment, Social Affairs and Inclusion, also warned of the dangers of a political fudge. This would be a disappointment, he said, given the scale of the problems Europe faced and the policy work going into developing novel solutions. Andor said that a ‘major intellectual exercise’ had been taking place inside the EU, as evidenced by last year’s White Paper and five accompanying ‘Reflection Papers’ that had been published. Collectively, these recognized the need for more powers at EU level to address the deep structural imbalances exacerbated by globalization.

Andor reminded the audience that the European Social Fund is, potentially, a powerful weapon in combatting these imbalances. But he added that the Commission needs to equip itself with a more powerful array of policy tools to combat inevitable rises in unemployment in a future recession, paying particular attention to its likely asymmetrical and generational effects. Andor detected signs of a change of approach with the establishment of the European Pillar of Social Rights, but noted that, for example, large, rich countries continued to block moves to set up a common unemployment insurance fund. This was a mistake, he said, because the recent crisis had demonstrated the need for a fiscal stabilization mechanism inside the eurozone.

Summing up the debate, ETUC Confederal Secretary Thiébaut Weber said that detailed analysis of the budget proposals by the ETUC showed that, contrary to promises made by the Commission, the coming MFF would be smaller. ‘We feel cheated’, he said. ‘Why are we already negotiating for less Europe?’ Weber suggested that cuts to cohesion policies and the ESF already looked baked into the proposed MFF. He warned that the coming European elections could result in the most Eurosceptic Parliament ever seen, making it even more difficult to defend social Europe.  

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