Brexit to deliver a blow to EU budget

Photo: Erik Prozes

Director General of the European Commission's Department for Regional and Urban Policy Marc Lemaitre says, when talking about the future of structural funds, that Estonia has been one of the main beneficiaries of EU subsidies since joining the union. However, Estonia should be prepared for new circumstances from 2020.

You met with officials from the Estonian finance ministry during your visit. What did you discuss?

Naturally we focused on Estonia's upcoming presidency to begin on July 1. Another aim of the meeting was to evaluate the effect of cohesion policy on Estonia since it joined the European Union. We also talked about the future. We concentrated on the future of the EU in general, but also looked at how to develop cohesion policy (that governs European Social Fund, European Regional Fund, and Cohesion Fund resources – ed.).

There is widespread interest in Estonia in what will happen to EU structure funds after 2020, or after the current support period ends. How will support be reorganized?

I hope this does not come as a disappointment; however, we must stick to a certain logical order here. What this means is that the EU is in the middle of Brexit preparations. With it we have launched the debate on what kind of a union do we want in the conditions of there being 27 member states.

This process has been launched, and the European Commission is currently in the role of a listener. I participated in a discussion this afternoon (yesterday – ed.) where I was greatly interested in what Estonians want. Your desires determine what will happen in 2021.

I understand that today's beneficiaries having to make a greater contribution has been discussed when it comes to potential reorganization of structural means. How many countries would this concern?

Talking about the EU budget, the United Kingdom's departure will inevitably shuffle the cards as they have contributed 15 percent of the EU GDP so far. We will find ourselves considerably poorer. The UK has also been the main contributor to the EU budget.

However, I would not overemphasize these concepts – main contributors and main beneficiaries. The EU budget is a common tool to aid in the achieving of common goals. While we can count the individual euros member states have sent to Brussels and received from there, it will not help us grasp the big picture.

For example, talking about projects cohesion funds have helped finance in Estonia, their realization boosts import from other EU countries. Whether construction materials for infrastructure projects, IT services, whatever. That is how our common market works. Therefore, economically speaking, the circle of beneficiaries goes beyond member states that receive support.

And yet we can say that sums contributed to the common budget by several member states will grow. How likely, in this situation, that the UK will not be the last to leave?

I see no connection whatsoever between those two things. I do not believe the Brits voted the way they voted because of the UK's part in the EU budget. It is a much broader issue. Like I said, we should not overemphasize the EU budget. Every member state contributes just 1 percent of GDP to it.

The countries that will remain part of the EU will have to decide on the level of expenses they want to see in the EU budget and how it will support their common goals. It has been the conviction so far that contributing to the EU budget yields a better return than redistributing the same resources domestically.

While I'm not sure of the exact nature of reorganization, contributions will grow by about 0.1 percent of GDP.

What about smaller member states?

It is the same concerning small members. How big of an expense can 0.1 percent of GDP be for Estonia? Germany will add 0.1 percent just the same. Those are our rules: contributions are measured as relative importance of GDP.

However, we must also look at the distribution of the common budget's resources. Members can say we cannot maintain our recent level of expenses now that the UK is gone. That debate is still ahead.

That said, I would like to emphasize that it will not bring great change in terms of sums paid into the budget. However, changes might be far more extensive in terms of EU resources and how much member states will benefit from them.

Let us talk about Estonia. How will these changes affect Estonians?

Looking purely at the books, Estonia is one of the biggest beneficiaries in the European Union. It is between 3rd and 5th place in those terms.

Of course we can also talk about a great economic success story in Estonia. You have become a country the level of development of the economy of which has grown from below 50 percent of the EU average to above 75 percent. This has happened between 2004 and 2016 and despite a deep economic crisis in 2008-2009. And it is clear that the closer a country moves to the EU average, the lesser its right to structural funds.

That is to say it is an entirely natural development that does not depend on Brexit. Estonia having done so well for itself should definitely not be seen as a woe or a punishment; however, solidarity has always been one of the underlying principles of the EU.

The Estonian economy is greatly affected by its closest neighbors. One the one hand Finland, and on the other Latvia and Lithuania. How will the situation change for our neighbors after 2020?

The situation in Latvia and Lithuania is very similar to what it is in Estonia. Both have also been success stories for the EU in terms of economic development. Latvia started from the very bottom and is making steady progress, even though it is some way behind Estonia and Lithuania.

I am convinced the Baltic countries will remain under special European Commission attention with the aim of finishing their full integration into the common market. We are currently making efforts to connect the countries to the common energy market to boost your energy security and reduce your dependance on Russia. We support all manner of energy connections with neighboring countries, whether we're talking about Finland or Sweden. The same goes for transport where we support your full integration into the rest of the common market.

Finland's situation is somewhat different when it comes to economic development. Talking solely about the EU budget, the situation might be different for Finland than for the Baltics. However, it will depend on the fundamental choices that will be made with regard to the future of the European Union in the coming years.