This week the EU will set the next seven year budget plans, running from 2021 to 2027.
Against a backdrop of new states waiting in the wings to join – all requiring pre accession funding, the EU must counteract the deficit caused by Brexit and respond forcefully to increasing eurosceptism.
There should be no surprise therefore at the noises being made at the highest level to make the distribution of funds dependent upon acceptable governance and hence the clear evidence of the EU starting to flex its ‘muscles’ to stifle any further disruption to its EU federalist dream.
Defiance of EU law and order is unacceptable that is now obvious; hence why Hungary and Poland, whose recent elections have resulted in nationalist governments, are on the receiving end of potential financial sanctions and even bloc expulsion. For those Balkan states seeking to join, the EU has made noises suggesting that money from the Cohesion Fund silo will be contingent upon the election of acceptable governments.
Against this backdrop the European Union meanwhile has to find ways of plugging the gap in its budget for the post-Brexit world while keeping the biggest recipients of funds under control. This conflict between finance and dogma will determine the direction of the EU for a generation, and it is impossible to say what will win.
To put the financial impact of Brexit into context the official EU budget runs to over €150 billion each year, of which €15 billion comes from the UK; but this is only the tip of the iceberg. The European Investment Bank has a loan book of €500 billion (of which the UK is on the hook for 13% in the event of default), and the European Fund for Strategic Investment plans to lend out up to €1 trillion over the coming years (the UK is the single largest contributor to this fund). Brexit will make an enormous dent in the ability for the EU to raise and hand out money. This is a major worry in Brussels, and threatens to severely clip the wings of its expansionist ambitions.
The response from the EU so far – to get EU funds member states must elect a pro-EU government. This is an affront to the democratic process. It is nothing short of coercion. One may not like Viktor Orban or Mateusz Morawiecki but there is no denying that they were both elected freely, and the will of the people must be respected. If Brussels follows through with the suggestion that funds will be withdrawn and change the rules of the game without specific treaty rights is fundamentally wrong. I do accept that it is the right of the club owners to set the rules for entry, but in this instance the rules are being changed after members have been admitted.
It also sends a worrying shiver through the candidate countries (Albania, Bosnia and Hercegovina, Kosovo, FYR Macedonia, Montenegro, Serbia, and Turkey) who will naturally feel compelled to elect pro-EU Governments if they are to join the club and get the cash, but in doing so be prepared to ‘trade off’ their right to object to the direction of the EU. I cannot see how that would sit with any understanding of liberal democracy because it prevents any future Governments, no matter the circumstances, of having a voice of dissent
But, despite these bully boy tactics by Brussels, they may have made a rod for their own back. Just suppose that Hungary and Poland refuse to play ball. Will they be expelled or will the EU curl up into a ball and give in? Another interesting scenario: should the Central and Eastern Countries hold fast and refuse to yield?
The EU is right to fear Brexit as the mechanism that could break up their cherished ‘Europa’ dream but taking the current stances could actually backfire and embolden eurosceptism in a way unimagined by the EU bureacrats.