EU budget is about more than arithmetic, Polish PM writes in FT

The Polish head of state argued that the EU budget should not be perceived as a financial burden but rather as an investment tool that helps stabilise investment in times of crisis. Paweł Supernak/PAP

Polish Prime Minister Mateusz Morawiecki, in an opinion piece published on the Financial Times website on Wednesday, spoke against cuts to the European Union budget, arguing that they could weaken Europe.

"Discussion of the next EU budget is one of the biggest and most contentious issues currently faced by the bloc. Negotiating a budget deal is not a purely arithmetical exercise. Rather, it must be a translation of political priorities into a financial framework," Morawiecki wrote.

According to the Polish prime minister, the current budget size, set at 1.16 percent of the EU's gross national income, should be a starting point for the negotiations of the 2021-2027 budget since "it is clear that lowering spending would mean weakening the European project."

The EU budget is closely linked to the functioning of the single market as data indicate that there exists a significant relationship between gross contributions of EU member states and the benefits they get from the single market, noted the PM.

"This means that focusing on net balances (whether countries pay in more than they receive) when considering the EU budget is misleading, as it does not reflect the true benefits and costs of integration," the PM wrote.

He gave the example of the Visegrad Group (V4) countries, comprising the Czech Republic, Hungary, Poland and Slovakia, which in 2010-2016 received net funds from the EU that constituted between 1.5 and 4 percent of their GDP. However, the outflow of dividends and property incomes from V4 to investors located in 15 countries of the so-called 'old' EU reached between 4 and 8 percent of the V4 countries' GDP in the same period.

"The single market lifted trade barriers and opened access to central and eastern European markets," Morawiecki wrote.

"We need to communicate the benefits of economic integration better. Emphasising net balances threatens to exacerbate anti-EU sentiment in some northern European member states," he added.

"We should also show how cohesion policy benefits net contributors to the budget. The implementation of the 2007 to 2013 cohesion policy in the Visegrad countries was worth €96bn in increased exports, and direct capital benefits to the EU15, including €23bn for the 'frugal four' of Austria, Denmark, the Netherlands and Sweden," Morawiecki went on to say.

The Polish head of state argued that the EU budget should not be perceived as a financial burden but rather as an investment tool that helps stabilise investment in times of crisis.

Morawiecki further argued that the costs of Brexit for the EU should be "more equitably distributed." "Deep cuts to both the cohesion policy and the Common Agricultural Policy (CAP), for instance, cannot be justified. The burden of such cuts falls disproportionately on poorer countries in eastern Europe," he writes.

The EU's agriculture policy should adhere to the "equal pay for equal work" principle so that direct subsidies for farmers should be ultimately equal across the EU, especially given the planned transition to a low-carbon economy, according to Morawiecki.

"Any changes to the financing of the EU budget must not result in higher burdens on citizens in the less developed countries. On the contrary, the focus should fall on sectors that benefit the most from the single market. Attention should therefore be given to the following proposals: a financial transactions tax; a digital tax; a single market levy; and an aviation fee (which is also progressive)," he wrote.

Improved VAT tax collection could also help to finance the EU's ambitious budget, and Poland could serve as an example of how to become successful in this area, he added.

"We should be more ambitious about the size of the next MFF (multiannual financial framework - PAP) in order to address a range of priorities. A strong, safe and prosperous Europe requires proper financing. We simply cannot afford to spend less," the prime minister concluded.