Finland's EU budget proposal aims at even less funds on cohesion and agriculture

HUNGARY - In Brief 31 Oct 2019 by Istvan Racz

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The political agreement on the EU's 2021-2027 budget framework still seems far away, but at least the positions taken by the various member governments have become clear by now. On the one hand, some of the big donor countries, led by Germany, would want to keep the budget at no more than 0.97% of GNI, whereas net recipients, including mainly the CEE members but also Spain and Portugal, are understandably proposing a much higher budget ceiling, around 1.14-1.16% of GNI.To get closer to an agreement, the Finnish government, currently holding the rotating presidency of the EU, have put forward a compromise proposal with the budget ceiling at 1.03-1.08% of GNI, as a basis for discussion at the November 15 meeting of the Economic and Financial Affairs Council. This proposal offers even less to net recipients, including Hungary, than the EU Commission's original budget draft. The latter was aiming at a budget ceiling of 1.11% of GNI, with the expected result that the funds allocated to Hungary as gross transfers (grants) would fall by 24% from the 2014-2020 level at constant prices. Under the Finnish proposal, gross transfers allocated to Hungary could decrease by no less than 26-29% at constant prices, to a level less than half of the 2014-2020 net transfer revenue, as a ratio to GDP (down to 1.5-1.6% from 3.2% in the previous 7-year period).Besides, a rule-of-law clause is still very likely to be part of the agreement eventually. However, Hungary seems to have good chances for a heavily watered-down version of the latter to be adopted, in exchange for the government's acceptance of receiving substantially less of financial funds than earlier. Even so, the political condit...