EU budget should be approved during Lithuanian presidency

Special report from BRUSSELS - The brokering of the deal over the EU budget for 2014-2020, and the summit for the Eastern Partnership (the EU’s initiative to cooperate with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) on Nov. 28-29, are the two main issues of the six month-long Lithuanian presidency over the EU Council this year. Lithuania would also be obliged to deal with some unexpected crises in the EU, but the relative tranquility on the EU stock markets, the victory by the German ‘Mummy,’ Christian Democrat Angela Merkel, in the German parliamentary elections as well as the failure of Barack Obama, Francois Hollande and David Cameron to turn the Western navies and air forces into the allies of Syria-based rebel fighters, allows Lithuania to concentrate on the above-mentioned two issues.

During the coming Eastern Partnership summit in Vilnius, the EU is hoping to see the signing of the Association Agreement between Ukraine and the EU, which would mean Ukraine will have a chance to gravitate towards EU membership by leaving the influence zone of Russia (this is why the Vilnius summit provokes some harsh reaction by the Russian empire-nostalgic Kremlin: the ban on Lithuanian dairy product imports was imposed by Russia on Oct. 7).
The cohesion policy funding for 2014-2020, which is the most vital part for the Baltics for the next seven-year EU budget, was discussed on Oct. 7-10 in Brussels, during the Open Days 2013, which is the annual forum of the EU cohesion policy. Some 6,000 policymakers, politicians and experts from all levels of government of all the EU states and many other countries attended the forum this year.

During the forum, the European Commission’s officials spoke very positively about the Lithuanian presidency of the EU Council. On Oct. 10, after a round of negotiation talks regarding the coming deal over the EU cohesion policy (the EU’s policy to reduce disparities between the levels of development of regions and countries of the European Union) for the next funding period, which is known in EU jargon as the Multiannual Financial Framework of 2014-2020, Johannes Hahn, EU commissioner for regional policy, described the Lithuanian brokering role during the negotiations as “a tremendous job.”

“One of the senior officials in the Commission’s negotiating team told me this is one of the best EU presidencies they have dealt with,” Shirin Wheeler, the spokeswoman for Commissioner Hahn, stated to The Baltic Times.
“It is essential that the seven-year budget would be ready by Jan. 1. It is as important as the Marshall Plan,” said European Commission President Jose Manuel Barroso, speaking at the opening session of the Open Days 2013. He added that “there is no growth without innovation and creativity” and emphasized that “infrastructure projects of new member states should have an added value.”

“The current economic and social situation does not allow for any delays in launching the new regional investment plan for growth and employment,” said Ramon Luis Valcarcel, president of the Committee of the Regions (the EU institution of regional and other locally elected representatives from the 28 EU countries) and president of the Spanish region of Murcia.

Some 325 billion euros will be available for cohesion spending between 2014 and 2020. More than 70 percent will be spent in the less developed regions of member states. Spain will be the third biggest beneficiary. It will be able to draw on over 25 billion euros over the course of the next seven years. The primary beneficiary will be Poland. It will get 72.5 billion euros, i.e. 2.5 times the amount granted to the second biggest beneficiary, Italy.
Lithuania will be able to draw on 6.4 billion euros; Latvia – 4.2 billion euros and Estonia – 3.3 billion euros.
Wheeler said that there will be significant changes in the cohesion policy.

The priorities will be the following: research and development, low carbon economy, digital agenda, and small- and medium-size enterprises. The amount of EU co-funding for SMEs will double in 2014-2020 in comparison with the Multiannual Financial Framework of 2007-2013.
This means no more easy money from Brussels for infrastructure projects, although this does not mean that Brussels will completely stop co-financing road construction in the Baltics or other less developed regions of the EU. Money for road construction and new roads would need to be tied, for example, to boosting small- and medium-sized business or connecting research centers.

“It is good to have highways, but it is also good to have something to transport on the highways,” Hahn said, emphasizing that the European Commission prefers to support SMEs.
“We have 23 million SMEs around Europe. If each SME would employ at least one employee, there would be no unemployment in Europe,” Hahn said. He added that from 2014-2020, more EU aid will come in the form of loans, not subsidies.

The Netherlands as well as Sweden and the UK argued for the EU aid to be earmarked only for poor countries. They stated that it makes no sense to operate a system where rich countries send money to Brussels, which sends it back to them with certain conditions regarding co-financing. Indeed, France would probably be able to finance its island of Mayotte (north of Madagascar) without the involvement of Brussels. However, France and other countries, which are donors to the cohesion policy, decided to preserve the status quo, agreeing to a reduction of only eight percent in comparison to the period of 2007-2013, in the total amount for the next seven-year funding. In 2007-2013, only 51.6 percent of funds were earmarked for the so-called new member states (those which joined the EU in 2004 and later). This percentage will be similar in the next seven-year period.

Since Lithuania joined the EU in 2004, this new member state got more than eight billion euros into its economy. Some 80 percent of the EU’s co-funding went to support the general economic infrastructure and 20 percent went to develop human resources.
Since 2004, Lithuania’s GDP has grown by around 1.5 percent more per year than it would have without the EU structural funds from the cohesion policy, according to Ricardas Malinauskas, president of the Lithuanian Association of Local Authorities, a constant participant at the Open Days and the mayor of Druskininkai. This spa resort is known for its Snow Arena. It is among the top five indoor ski slopes in the world. The arena was built in 2011 and the total cost of the construction was 29 million euros (40 percent of this sum came from EU structural funds).

“Lithuania would have already collapsed if it were not for EU aid,” Ausra Maldeikiene, economics professor and famous critic of Lithuania’s non-social solidarity-oriented (and, therefore, not sustainable, according to her) economic model forcing hundreds of thousands of Lithuanians to leave for other European countries, said during an
open lecture at Vilnius University
on Oct. 11. She said that the Lithuanian economy survives only due to Germany’s money, which is sent to Lithuania via the EU cohesion policy.

The green accents in the EU’s cohesion agenda will allow Lithuania to build more boilers for centralized heating systems in Lithuanian towns, which would use biofuels instead of gas imported from Russia. However, the real alternative to Gazprom gas will be the LNG import terminal in the harbor at Klaipeda, which is expected to start functioning by the end of 2014.

The Lithuanian government may hope to receive some EU financing for the terminal construction (although the biggest blow to Gazprom could be the investment by the U.S. company Chevron into shale gas exploration in Lithuania, but on Oct. 8 some environmental and taxation-related hysteria from the ruling Social Democrats, and some of their coalition colleagues from the Order and Justice Party, forced Chevron to pull out from this investment. Nonetheless, some hopes still exist regarding future shale gas exploration in Lithuania).