February 14, 2018 / 4:11 PM / 10 months ago

Factbox - EU budget plans sets bloc up for tough debate

BRUSSELS (Reuters) - The European Union executive set out options on Wednesday for budget cuts and new sources of revenues to plug the hole left by Britain’s exit from the bloc for the period from 2021 to 2027.

At an EU summit later this month, European leaders will debate the following options, including making EU money conditional on members living up to EU values and standards on the rule of law:

BORDER CONTROL

With border security a priority for member states, the European Commission said implementing a full border management system of 100,000 staff comparable to the United States would cost around 150 billion euros over the seven year budget period, corresponding to about 14 percent of the current budget. Simply upgrading border and coast guard service could cost around 20-25 billion euros, while trying to maximise existing infrastructure would require a budget of around 8 billion euros, it said.

DEFENCE

In a show of unity after Brexit, 25 EU governments signed up to a new defence pact, promoted by France and Germany to fund, develop and deploy armed forces together.

To build on the initiative, the Commission said that at least 7 billion euros would be needed to co-finance defence industry development - in order to leverage some 35 billion euros.

To make a “substantial difference” on developing new technology, the so-called European Defence Fund should have a research budget of at least 3.5 billion, it said.

The Commission also suggested creating a separate funding mechanism for the period. “Due to the limitations of the Treaties the EU budget is not able to cover all EU areas of action in the field of security and defence,” it said.

ERASMUS

The EU executive offered up an estimate for doubling the number of students who could take part in the popular exchange programme, known as Erasmus. To give one in three young people the opportunity to study abroad through the programme would require a 90 billion euro investment. To reach 7.5 percent of young people across the bloc would cost 30 billion euros, it estimated.

EURO ZONE BUDGET, STABILISATION FUNCTION

Devoting at least 25 billion euros to help realise the Commission’s vision for strengthening the euro area would “provide critical mass and help avoid a concentration of funding on a few Member States only,” it said.

The stabilisation function should be built “progressively over time” and rely on grants and loans guaranteed by the EU budget, loans from the European Monetary Fund and a voluntary insurance mechanism based on national contributions. The contribution from the EU budget “would not necessarily need to be very high”, it said.

COHESION FUNDS

Setting up for what is likely to be one of the biggest budgetary battles, the Commission proposed cutting money to more developed regions including in Italy, Spain, Ireland and Sweden, by between 95 and 124 billion euros. Under the scenario of steeper cuts, it would end investments for less developed regions in France, Italy and Spain.

AGRICULTURE

Another contentious issue is how much money the bloc distributes to farming under its so called Common Agricultural Policy. The Commission suggested reducing funds by between 15 and 30 percent, representing savings of from 60 to 120 billion euros. Any decrease should go hand in hand with reforms of how the funds are spent, it said.

LEVERAGING

The Commission has also proposed to leverage funds available in the long-term budget in a similar way the EU has used to boost its investment capabilities. This would mean using EU money only as guarantees for more risky parts of investments co-financed by private investors. Such use of budget money could “more than double the investments mobilised over the next Multiannual Financial Framework up to EUR 2 trillion” the Commission said.

RULE OF LAW

The Commission proposed EU funds only be granted to member states who live up the bloc’s fundamental values and standards on the rule of law. Making funds conditional would pit the Commission against member states like Poland, which has clashed with Brussels over reforms to its courts.

Reporting by Alissa de Carbonnel @AdeCar; Editing by Keith Weir

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