Dombrovskis demands continuing the Cohesion Policy funding to Latvia in the context of EU’s Multiannual Budget

RIGA - “A failure [in the agreement] would mean a failure for jobs and growth.” This was one of the conclusions made by the President of the European Council, Herman Van Rompuy at his meeting with the Latvian Prime Minister Valdis Dombrovskis, held in Riga last Friday. The meetings were convened to discuss the Latvian interests in the EU Cohesion Policy funding in the context of the negotiations of the Multiannual Budget for 2014-2020, and also the Latvian objective to join the euro currency in 2014.

Dombrovskis defended the importance of maintaining the current level of Cohesion Policy funding for Latvia, which is the basis for economic growth and national development. It makes sense in the current phase of negotiations between the member states that will take a final decision at the end of the year. These conclusions about the provision of the Cohesion funding are very important for the Latvian economy, given that the current EU investment helps to create favorable conditions for economic growth and infrastructure development. At the moment, Latvia receives 347 billion euros for 2007–2013 from the Cohesion Policy funding and it is expected to be much less  if the Member States decide to press ahead with changes in the next few  months. “I cannot say today what the final agreement will be, but I can say one thing: it will need the unanimous agreement of every Member State and the consent of the European Parliament,” said Van Rompuy.

One of Latvia’s main priorities in these negotiations is the Common Agricultural Policy, about which Dombrovskis says that it is essential to convince all the skeptical member states to maintain at least the current levels of funding for the next budget. The aim is to fight for fair and equitable conditions for Latvian farmers within the European common market.
Van Rompuy underlined the case of Latvia as a good example of how cohesion funding helps the development of European countries and regions. In this sense, Van Rompuy noted that the Latvian government’s efforts to keep the national co-financing with European structural funds in the middle of the euro crisis as the key reason for its economic recovery.

That is why the European president showed his commitment to maintain at least the current level of Cohesion funds at the next summit in November. “I will ask my fellow European leaders to agree the future multi-annual financial framework for the EU. Even if this represents only about 1 percent of our GDP, it does amount to around 1 trillion euros over seven years which can have huge impact on growth. It enables investments with a Europe-wide growth potential which otherwise would simply not be possible,” said Van Rompuy.

What is clear is that both Dombrovskis and Van Rompuy demanded flexibility to get a “fair and balanced deal.” The final decision depends on a compromise of the amount, which is at the rate of 0.1 percent according to Van Rompuy, much smaller than those rates mentioned in previous discussions.

Other questions raised at the meeting included the necessity to stabilize the eurozone, about which Rompuy stated that the EU is negotiating the possibility of fiscal capacity for economic and monetary union. “There is a need for some kind of budget to stabilize the euro and to assist countries undergoing structural reforms”. In this sense, what Van Rompuy clarified was the impossibility to change the basis of Cohesion Policy funding: “The draft conclusion has nothing to do with the multi annual financial framework which is a different question as it deals with cohesion, productivity, research and development.”

Van Rompuy underlined the recent measures to stabilize the eurozone, such as the necessity of the common Fiscal policy, the European Stability Mechanism and the “Single Supervisory Mechanism” as the main common tool to ensure the necessary control to avoid any future banking crisis.

About what Latvia is doing to join the euro on 1st January 2014, Van Rompuy stated that there are still some questions to be dealt with beforehand, but he didn’t clarify exactly what they were. Questions including how Latvia is facing up to the Maastricht criteria and how to ensure an efficient way for European investments not to be influenced by the problem of corruption weren’t commented as was perhaps to be expected.