Farming versus foreign policy: The future of the EU budget

Earlier this week, the European Parliament approved Oliver Varhelyi as the new Hungarian commissioner. The move finalised an agreement between the parliament’s political groups, member state governments, and the incoming president of the European Commission, Ursula von der Leyen, on the key personnel of the European Union’s executive body for the next five years.

But there will be barely time for them to catch their breath and regroup before they launch themselves into the next big discussion: finding a compromise on the EU’s budget for 2021-2027. If the rows over the Commission seemed fraught and complex over the last few months, they were perhaps only a taster of what is to come, since all the vision statements about a “Union that strives for more” will mean nothing if there is no money behind this ambition.

Technical though it may be, the discussion on the next Multiannual Financial Framework (MFF) goes to the heart of what sort of union member states want the EU to be. While some leaders aimed to reach an agreement on the MFF before the May 2019 European Parliament election, the differences between member states proved too great to bridge – so they put the argument on ice until the new Commission was in place.

But now there is pressure to find a deal quickly. For von der Leyen, the pressure comes from the fact that a lack of a deal on the MFF would limit the new Commission’s ability to implement its programme from 2021 onwards. This would be embarrassing and frustrating for a body that has come in promising a new, more political EU – one that responds to the mandate it received from voters in the May 2019 election. The Commission needs a budget that will allow it to invest in the future of the union.

French President Emmanuel Macron seeks an MFF agreement with a strong agricultural component that he can sell to a domestic audience before France’s March 2020 municipal elections. And – as shown by his recent willingness to block progress on EU enlargement, as well as to throw into question pillars of European security such as NATO – Macron does not allow his rhetoric on building l’Europe qui protégé to prevent him from using disruption tactics at the EU level, if he feels this will elicit a sympathetic response from voters in France.

Other countries’ key priority in the MFF debate is not the timing but the nature of the agreement. For the “friends of cohesion” – a group of 16 EU member states, among them the Visegrád countries – this means significant investment in structural and cohesion funds; for the new Hanseatic League states, it means restrictions on the overall size of the budget as a proportion of gross national income.

With all sides holding such entrenched views, it will not help in the next phase of discussions that many governments feel bruised and battered by the last round of negotiations over Commission membership. Nonetheless, it is likely that, from early 2020 onwards, the need to move towards a decision will begin to focus minds on the inevitability of compromise. Until then, the Finnish presidency has a difficult task ahead: it must present a framework for compromise to the last European Council meeting of its tenure, in December, before handing responsibility for finding a deal to Charles Michel in his new role as president of the Council.

Rows over the Commission were perhaps only a taster of what is to come.

To explore what this all means for the EU as a global actor, the European Council on Foreign Relations and the European Think Tanks Group convened a discussion in Berlin this week. There is a strong risk that, as part of the broader row about the overall size of the budget and contributions to expenditure within the EU, there will be a decline in the bloc’s allocation of overseas investment. Under the European Commission’s current proposal, the EU would allocate €123 billion to the neighbourhood and the wider world. This allocation incorporates at least three innovations on the last MFF. The proposal combines the neighbourhood and external investment instruments into one (known as “NDICI”), and sets out the budget of the European Development Fund. There is also a new expectation that 10 percent of this fund will be spent on projects that contribute to tackling the “root causes of migration”. All three of these changes have caused debate in the policy community about the EU’s global role.

But, to date, there has not been a huge amount of debate on the NDICI dimension of the budget among member states. The challenging part of this aspect of the budget is that it is unlikely to receive a great deal of attention in the MFF negotiations. The idea that the EU needs to build its strategic sovereignty is gathering momentum in national capitals and in Brussels, with von der Leyen having called in her mission letters for a more “geopolitical commission”. But, in a recent ECFR survey of attitudes towards MFF negotiations among policymakers and influencers across the EU member states, only four countries said they had a strong interest in the allocation of external aid – and none said they had a very strong interest in it. (By comparison, 19 had a strong or very strong interest in cohesion funds, and 20 a strong or very strong interest in the common agricultural policy.) The EU’s global role matters to member states, but investing in it is not political leaders’ top priority.

In contrast, this role is a big concern for voters. According to a large-scale ECFR/YouGov survey carried out in January 2019, European voters identified the EU’s ability to act as a bloc in a world of continent-sized powers as one the greatest losses if the union were to collapse (after the loss of the ability to live, trade and work in other EU member states, and the loss of the euro).

European leaders should heed this message as they head into the next round of negotiations on the MFF. The EU’s ambition to punch above its weight in geopolitics is not necessarily just a luxury that can be sacrificed to other areas of spending, but will inform voters’ perception of the bloc’s performance in the coming years.

The seemingly urgent – such as guaranteed subsidies for French farmers – should not always come before the important: Europe’s long-term ability to defend itself in a competitive world. The effort to find the right balance between these pressures is the hardest task EU governments currently face. If they succeed in this, they could even go beyond the ambition of the Commission’s proposal to create an EU that delivers more of what Europeans really want.