2020.02.05 16:00

Smaller pie more difficult to split – Lithuanian ambassador on EU's post-Brexit budget

Erika Alonderytė, BNS 2020.02.05 16:00

It will take a few more rounds of talks for the European Union member states to agree on the 2021–2027 budget, a pie that is smaller following the UK's departure.

Jovita Neliupšienė said budget negotiations are gaining momentum, but decisions usually get made made after two rounds of summit talks.

Read more: Cutting EU cohesion funding for Lithuania unfair, FM says

“The president of the Council believes that a deal must be reached. His job is to push member states toward a compromise, but we usually have two Council summits,” she told Lithuanian journalists.

EU leaders will meet in Brussels on February 20 to discuss the next long-term EU budget.

Brexit-related problems

The departure of the United Kingdom, one of the biggest contributors to the EU budget, makes dividing up the pie more difficult, according to Neliupšienė.

“Negotiations have started; they are gaining momentum. The biggest problem in talks on this financial perspective is its size, because the UK, a large contributor to the EU budget, has just left the bloc,” the ambassador told journalists in Brussels.

“[The budget] is decreasing sharply, and it's always more difficult to agree on a shrinking basket,” she added.

The latest budget proposals call for slashing cohesion funding for Lithuania by 27 percent in 2021-2027 compared with the current period.

Lithuania seeks to minimise the funding cut. The priorities also include achieving higher direct subsidies for farmers and more funding for the decommissioning of Ignalina Nuclear Power Plant.

“No negotiator can say in advance that something is unrealistic,” Neliupšienė said. “We can and must fight, and make our arguments and substantiate them.”

EU funding cut to affect economy

Cohesion policy funding, a key component of the EU budget, is aimed at helping poorer regions to catch up socially and economically with the bloc's more developed regions.

In the latest 2021-2027 budget proposal, cohesion funding for Lithuania is cut by 27 percent, or around 2 billion euros.

Neliupšienė says there are enough arguments for negotiating and reaching a deal.

If funding is cut as proposed, Lithuania will see a decline in public investment and may fall into a middle-income trap, Neliupšienė believes. Its economy may slow down to a level where the country will return to the group of less developed countries.

“Another argument is that most of the money invested through Cohesion by the big EU budget contributors actually comes back to them. If we look at who these Cohesion project implementers are, very often these are Germany, Sweden and the Netherlands. The money comes from companies of these countries and returns to them,” Neliupšienė said.

“The other countries are not excessively enthusiastic about saving us, but nobody is saying that there's no need to solve these problems either,” she added.

Read more: Is Lithuania catching up with Europe?

In the next financial framework, Lithuania will be split into two regions with different development levels: Vilnius and the rest of the country.

According to Neliupšienė, the division will help the country save just over 1 billion euros in the next budget.

“This is about the level of co-financing. It doesn't affect our overall package. We'll get a set amount of money and the issue is how much we have to contribute from the national budget. The Vilnius region will need a larger national contribution, while the rest of Lithuania will need less contribution,” she said.

In the current 2014–2020 period, Lithuania is treated as one region and the EU co-financing rate averages 85 percent. The co-financing terms in the next budget will still need to be negotiated.

Support for agriculture

The current budget proposal calls for reducing support for the Rural Development Programme by about 27 percent and increasing funding for direct payments by about 5.8 percent. Overall, support for agriculture is set to be cut by about 5 percent.

Lithuania wants EU payments to its farmers to be brought up to the bloc's average level as soon as possible.

Currently, Lithuanian farmers receive 181 euros in direct payments per hectare of arable land, well below the EU average of 266 euros.

Under the European Commission's budget proposal, direct agricultural payments in Lithuania would even fall in the first year, before rising to 204 euros in late 2027.

EU budget to shrink by EUR 60 billion post-Brexit

The EU's 2021-2027 budget is set to decrease by around 60 billion euros following Britain's departure.

The UK will still negotiate with Brussels on a post-Brexit partnership and will be able to join some EU programmes.

EU leaders are holding bilateral meetings with European Council President Charles Michel this week and next week. Member countries present their priorities and wishes, and Michel will later unveil a new negotiating package.

Read more: Lithuania in for ‘shock therapy’ as EU funding drops