Enlargement to Retrenchment: EU budget and the East

Behind the headline cuts in the European Union’s 2014-2020 Multi-Annual Financial Framework (MFF), lies a new EU retrenchment policy on its eastern borders. The protection of EU Structural and Cohesion funds to the European Union and the gutting of the “Global Europe” spending ceiling, within which the commitments to the Eastern Partnership initiative are housed, demonstrates the increasing disinterest the EU has to further enlargement. Whilst the actual impact on Eastern development is not yet clear, mixed success in promoting democracy and development over the last year does not bode well for continued enlargement.

Budget winners and losers

Whilst newspapers focused on David Cameron's calls for a real terms cut in the headline budget, there was a groundswell movement in favour of promoting long-term growth through investment across the European Union, particularly in the East. The subsequent agreement has initiated a scramble for funds within an overarching cut of the budget to the sum of 969 billion euros. Central Eastern Europe fared well and in particular, Poland, which led the so-called Friends of Cohesion Policy, can claim to have won this round.

Despite weathering the economic downturn better than a number of Western European states, Poland will now receive more EU investment than under the previous budget – 105.8 billion euros, of which 72.9 billion euros was from the cohesion policy. As Polish Prime Minister Tusk publicly stated before the Summit: “Good Polish-German and Polish-French relations are really helping to get a compromise… [and] not less for cohesion funds.” He was proven to be correct and the overall commitment ceiling of 325 billion euros gave Poland, along with Bulgaria, the Czech Republic and Romania, increases in its national cohesion funding.

It was the non-EU members of Eastern Europe which experienced deep cuts to bring the budget down to the target of 1 per cent of the EU's GDP. The “Europe as a Global Actor” heading which covers the EU’s external activities including pre-accession aid, development under the neighbourhood policy, and humanitarian aid, lost out from an original budget proposal of 72.45 billion euros last July to 58.7 billion euros. To put this into context, the “Competitiveness and Cohesion” heading now constitutes 44.6 per cent of the main EU budget, while the “Europe as a Global Actor” heading comprises just 5.7 per cent of the total funding.

This budget was therefore one which backed away from establishing the EU's place in the world, guaranteeing enlargement, and instead protected those existing interests which had been established.

Assessing the Eastern Partnership

Following the EU Council lobbying, the Commission will now begin internal hearings to decide how the distribution of cuts will affect each programme under the EU’s external headline. Here, results and strategic planning will play a much greater role than relations with Germany. As the latest European Council of Foreign Relations scorecard has set out, developments in Eastern Europe should be considered an overwhelmingly mixed story, both in terms of succeeding to develop open and pluralistic societies in Eastern Europe, as well as developing greater trade links to bring Eastern Europe into line with EU norms and interests. EaP financing in 2013 will total 230 million euros, and with these frustrations in mind, there is little surprise that further funding for projects may not be forthcoming.

The EU experienced limited success in fostering democracy in Ukraine, Belarus, Armenia and Azerbaijan. As the ECFR notes: “None of the region’s four parliamentary elections in 2012 fully met OSCE standards,” despite marked improvements in the Georgian elections in October 2012, which were held relatively peacefully. Where European countries found themselves more divided on policy means was Ukraine, particularly during the 2012 European Football Championships where a divide emerged over whether to boycott matches in Ukraine in an outcry against the continued imprisonment of Yulia Tymoshenko.

Despite continued investment over the last five years, the 2012 Ukrainian elections “reversed democracy”, according to the OSCE, and were heavily influenced by the “excessive role of money”. This comes after five years of institution building, and it is little surprise that the ECFR judged the outcomes achieved this year to only have a score of 1 out of 10 as the same grade in 2012, and even worse that the year before.

There was equally little progress over the democratisation of Belarus, despite strong leadership under Germany and Poland, and much greater alignment over the means of compelling the Lukashenka regime to reform. The EU Council has already been forced to extend sanctions against companies linked to the regime after widespread harassment during the parliamentary elections, although these have failed to improve the situation within the country.

The investment in time and resources has benefited the EU by expanding free trade to the new Eastern European states, another key goal of the ENP and Eastern Partnership initiatives. The liberalisation of trade through a Deep and Comprehensive Free Trade Agreement (DCFTA) has been established with Ukraine. Even here however, the two strands of neighbourhood activity – democracy and economics – have minimised results.

The friction generated between EU states over whether to first trade or ensure an improvement in human rights, has forced the agreement to stall, and it has yet to come into effect. The benefits of the Eastern Partnership Funds are thus undermined on all sides and lacking a coherent argument for continued expenditure outside of the EU. It remains to be seen whether the long process in the region will continue to the same extent.

Stunted expansion

The focus of the EU has shifted westwards again and the next seven years of the EU budget and the Council have signalled its intent to solidify development in the old Eastern Europe, at the neglect of fostering more development and relations with the new Eastern Europe. A draft signifying how the Eastern Partnership will be affected by the latest EU Budget will be presented by the Commission on April 1st 2013. It would be foolish to predict how much the EU’s Eastern neighbours will lose out through these cuts.

If the latest failings are factored, however, a serious degree of lobbying will be required to secure its future funding as a flagship EU Commission project.

This text is published as part of an ongoing cross-publication partnership with Europe & Me magazine. The text also appears as a bimonthly column.

Mathew Shearman is a London based politics editor of the transnational life magazine Europe and Me. For more, follow him at @shearmanm