Boris Popivanov: The European budget cannot provide solutions to the post-coronavirus crisis

Member States will undoubtedly exceed the set deficit limits

The looming social and financial cost of the coronavirus crisis, which is going to aggravate a recession that was already on its way, will increase pressure for Brussels to rethink its priorities. Various lobbies will insist that the industries they represent are most deserving of relief. A social-minded alternative would suggest that the companies should be pressured to forego a significant chunk of their profits in the name of social stability, says political scientist Boris Popivanov in an interview to Europost.

Mr Popivanov, the impact of the coronavirus pandemic on the European economy is likely to make the arguments over the multi-annual financial framework 2021-2027 even more contentious. Are we to expect further entrenchment of positions?

No matter how it is distributed, the European budget cannot provide a response to the financial trouble that economies are bound to encounter in the aftermath of the coronavirus crisis. The measures are national, poorly coordinated and addressing widely varying timeframes. Even now it is clear that budget deficit limits will be exceeded in many cases. Common rules in a number of industries will also be violated. The looming social and financial cost of the crisis, which is going to aggravate a recession that was already on its way, will increase pressure for Brussels to rethink its priorities. Various lobbies will insist that the industries they represent are most deserving of relief. A social-minded alternative would suggest that the companies should be pressured to forego a significant chunk of their profits in the name of social stability. That has not been done since the golden age of the western social state and the companies will not like it. The market alternative would require the poor to foot the bill once again, but that could be a combustible set up. At this stage, governments are focused on their domestic situations, but they will soon have to consider the European implications. After all, there is the single market! Think about the movement of unemployed and migrants and businesses barely staying afloat. I would not want to predict the outcome.

The budget is the bloc's mechanism of pursuing various policies. Is there a consensus, to begin with, on what the priorities are?

No and there cannot be a consensus. The budget is a function of the policies and they are a function of a vision for the future. We are yet to reach a consensus on the basic issue of where the EU is headed post-Brexit. As Winnie the Pooh would remind us, when you do not know where you are going, you always end up somewhere else. The same risk applies to the multi-annual financial framework. If you are not sure how it will be used, there is a risk it may be used in a different way. Over the past year we saw a flurry of proposals from France, procrastination from Germany, centrifugal forces generated by Central Europe. Paris wants Europe to unite around its Western core. Germany wants to find a way that everyone comes together, but only when they are ready. Central Europe wants more money and less Brussels. Until Berlin and Paris agree on a path to integration and figure out something to offer to “those lagging behind” and “the reluctant”, the lack of direction will persist. You have to admit that new common policies on defence and migration would result in one profile of the budget, while quietly giving up on them - in a completely different one. This increases the chance of temporary budgetary solutions.

What are the main points of contention between donor countries, which are not willing to make even bigger contributions to the common budget, and the “friends of cohesion”, which are prepared to contribute more as long as they stay in the group of net recipients?

An underlying issue is the lack of clear direction. When you are committing funds, for seven years ahead no less, you want to know how they will be used. It is one thing to make a higher contribution to support France and the ideas of a Eurozone government. It is a completely different thing to fund Germany's balancing integration efforts, and yet another thing to support national governments that do not have your trust.

Let me add the element of domestic policy to the mix. Most donor countries have strong populist and nationalist parties that breathe down the neck of cabinets. Those parties exploit not only migration fears but a certain reluctance to give money to other countries when the locals need it just as much. To avoid losing public support, governments are forced to acquiesce to nationalistic demands and decisively protect smaller contributions.

To break the stalemate, Brussels seems willing to employ human rights and rule of law as filter. In other words, invite donor countries to increase their contributions, but with the assurance that the money will not go to countries that do not meet standards of democracy. Such measures are being actively discussed for Hungary, Poland and even Romania. But as any other compromise, this approach will not permanently fix anything. It needs to be clearly stated that without reforms the European project is doomed to transition from one crisis to the next. Brexit and the subtraction of the British contribution to the budget have caused disagreements that make it clear that even the status quo cannot be preserved. The existing mechanism is so delicate and unstable that even the slightest disturbance makes returning to the original state of equilibrium impossible. Things cannot continue as they were.

Most MEPs are in favour of increasing contributions to 1.3% of the gross national product to make up for the hole left by Brexit. Is this a sign of disagreement between institutions?

For years now, the European elites have identified the so-called democratic deficit as a key problem of the EU. It is what has driven the efforts to strengthen the role of the only institution elected directly by the citizens - the European Parliament. So the MEPs have the obligation to demonstrate that their body is not there to rubber-stamp the decisions of the Commission or the Council.

The problem is that MEPs are not responsible for the contributions of the countries they represent. The responsibility lies with national governments, which have the last word. The disagreement you are referring to is normal and it is inherent in the status of these institutions. One side can afford to be more European than the other.

What are the chances of countries from Central and Eastern Europe to continue receiving funds aimed at promoting convergence of living standards, rural development and agriculture?

Their chances will directly depend on two factors. First, to what extent these countries are able to build coalitions within the EU and create a united front in protecting their shared interests. For example, they did not show the ability to do so in the battle for the top European positions following the general elections last May. A connected European space is impossible without joint action. Let us not enumerate all the areas where work has to be done. It is enough to note that in no true Union a situation can exist where you can cross half of the bloc in 6-8 hours by train and need more than 24 hours for the other half. The second factor concerns the conditions under which funds are allocated.

It's true that authoritarian trends are growing in Central and Eastern Europe. An entire oligarchic machine has sprung out of utilising European instruments. But it is also true that the accusations of undemocratic actions may turn into a dangerous tool in settling geopolitical and financial scores. We should tread carefully when it comes to vesting in institutions the power to judge which country is democratic and which is not. Central and Eastern Europe know all too well of such policing methods thanks to their woeful experience with the Soviet Union, so they can't be welcoming an even remotely similar approach from the European Union.

If Member State contributions are not raised, could this undermine the competitiveness of the EU?

What will be undermined is mostly the competitiveness of some EU countries. Their economies were never that competitive to begin with, but the whole cohesion idea was for them to strive for the best examples. France recently floated the idea of “European champions” - i.e. directing investments towards industries that have the capacity to compete with the global economic powers. It sounds good, but will it still sound so good if it turns out that the champions are located exclusively in France and Germany?

With a tragically low threshold of foreign investments, Bulgaria should be more than engaged in making sure that the competitiveness of its economy is supported on the principle of European solidarity.

In the past month and a half, the Commission presented several really ambitious projects - the so-called Green Deal, a new industrial strategy and an action plan for circular economy. Are these proposals realistic in light of the looming recession, additionally fed by the coronavirus crisis?

Many plans and initiatives will inevitably be postponed. Long-term proposals are made on the basis of development and growth projections for years to come. I would imagine that the potential shocks of a recession have been taken into account. But the current situation carries a risk that all calculations, even the more cautious and moderate ones, could turn out to be too optimistic. I will repeat my position - the biggest priority is that the EU makes a decision on the direction of its development. No amount of strategy can compensate for the deficit of key strategic clarity - political direction from the top.

The European institutions have serious outlays, of which citizens see no benefit. Will the EU be able to demonstrate efficiency and added value for the money that European taxpayers are paying?

The outlays are not dramatically high. We are poring over them because we are not sure in the name of what the money is being spent. The existing configuration at the top of the European hierarchy was created as a result of a complex and difficult deal. It was supported with certain qualifications and expectations across the board, nowhere was the support unconditional or enthusiastic. This is why if the leaders of the European institutions fail to present and convincingly defend a plan of action in the relatively near future, they risk being bombarded with accusations that they have disappointed and should take responsibility for the crisis. As someone who is loyal to the European idea, I would hate to see (former EC President Jean-Claude) Juncker and (former European Council President Donald) Tusk becoming the only leadership examples in the months or years to come. Ursula von der Leyen and Charles Michel have to prove themselves. They are being asked to jump really high without run-up and under poor conditions.

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Boris Popivanov has a PhD in political science from Sofia University St. Kliment Ohridski, where he is currently an associate professor. He has authored two books - The New Voter (2007) and Changing Images of the Left in Bulgaria (2015) - as well as numerous scientific papers and expert articles.

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