What will become of EU subsidies after 2020?

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A backdrop of a general strike by public transit workers, discussions concerning Catalonia’s future, and controversial Brexit talks saw Brussels analyze recent use and future of European subsidies last week. Farmers need to brace for bad news, while researchers and the transport sector can breathe more easily.

“Things are improving, but there is still plenty to be done in all European countries and regions,” European Commissioner for Regional Policy Corina Cretu said at a press conference a week ago. The commissioner said, when presenting the latest coherence policy report, that even though inequality between different regions of the EU has started to abate since 2015, many EU citizens still inhabit areas the GDP of which falls short of pre-crisis levels. “We have a lot of inequality, and not just between countries, but also between different regions inside countries,” she said.

There is no doubt that the feasibility of coherence of development policy has been called into question lately, which is why Brussels continues to emphasize its necessity. “We can talk about how to change the way coherence policy is implemented, but not call into questions its existence,” President of the Committee of Regions Karl-Heinz Lambertz told journalists last week.

Rail Baltic to be funded

Postimees’ sources say it is certain Estonia will not qualify as a less developed country, or one the GDP of which falls short of 75 percent of the union’s average after 2020. This also means Estonia will have to start contributing more to the EU budget than its gets back.

Estonia and Lithuania are one percentage point short of the 75 percent mark, while Latvia needs to work a little harder to get there. The Czech Republic and Slovakia are also on the verge of joining the more developed countries’ club. Hungary and some wealthier regions of Poland might also make it.

It is probable that the recent seven-year support period will be replaced with one spanning five years, while there is also a “5+5” option on the table.

Even though Estonia has made use of EU subsidies to modernize most of its infrastructure – several major hospitals, schools, kindergartens, competency and health centers – transport will remain the problem child also after 2020. Transport will, however, remain eligible for subsidies. Development of cities is a European priority, while it remains unclear how it will be included in the new program period. Urban public transport will be retained.

The future of major EU projects also remains open. Transport ministers released a joint statement in late July, demanding they could count on investments after 2020. Abolishing the instrument was discussed already before the current 2014-2020 period, while investments were initially retained as some projects sported poor quality. The latter problem did not concern the Baltics and Poland.

Sources Postimees consulted said Estonia need not worry about Rail Baltic funding as Baltic cooperation is very important to the European Commission. A rail connection between Tallinn and Helsinki, either via a tunnel or ferries, is being discussed as part of the new financing period.

Farmers are in for a disappointment regarding the new financing period as their support will likely be cut. While it has been proposed support should only be available to poorer regions in recent

discussions, it is probable it will be made available to everyone. However, it is possible the final results of Brexit talks could alter the situation.

Research and innovation, where Estonia is already producing much better results than its Baltic neighbors and in which the EU perceives great potential, will be left in the best situation in Estonia after 2020.

Effect on the current period

Regional policy spokesperson for the Commission Johannes Bahrke said it is currently very difficult to assess which countries will become net contributors instead of net beneficiaries after 2020. Everything depends on criteria the new period will use to make financing decisions. “Today it is GDP; however, it could also be migration statistics, climate change in the future,” Bahrke said.

He added that it is possible Estonia might not end up contributing more than it gets in return.

Digitally talented Estonian companies can cooperate with less developed regions and bring their subsidies to Estonia that way.

Commissioner Corina Cretu from Romania, who repeatedly emphasized the importance of the social dimension when talking about support after 2020, made no secret of the fact that Brexit could influence the ongoing support round. “We are at an impasse as we do not know the results of talks with the UK,” she said.

The commissioner said the EU has counted on the United Kingdom’s contribution until the end of the current round. “We are not punishing them for leaving; we are simply acknowledging the fact they were present when member states agreed to take on this obligation,” she explained. Cretu said the question now is whether the EU will give in to the UK and settle for less until the end of the financing period, or whether it will stick to its original ambition. Lambertz also said in his “state of the union” speech that the UK must take responsibility for obligations already adopted. “For me, Brexit is another failure for Europe,” Lambertz said, comparing the Brits’ exit to the migration crisis.

However, current period funding has been redistributed even outside of Brexit. Adjustments in June of 2016 cut available funds for five member states, including by €35.4 million for Estonia. Current round financing was also cut for the Czech Republic, Slovakia, Croatia, and Sweden.

The reason is very simple: these counties have managed a more successful recovery from the economic crisis.

Information available to Postimees suggests the Ministry of Finance has also decided to proportionally reduce sums allocated for all high-priority fields, while it has not yet presented an exact plan to Brussels. No such corrections have been made in the past.