EU’s Poorer States Snub Regional-Aid Cuts as Budget Clash Looms

(Bloomberg) -- The European Union's poorer members said they oppose planned cuts to development funds, setting the stage for a clash with their richer peers as the bloc negotiates its next trillion-euro budget.

The EU needs to keep funding for the so-called cohesion policy at the current level, in real terms, if it wants to continue reducing disparities among its members, the group of 16 eastern and southern nations, known as the Friends of Cohesion, said in a statement.

“The Cohesion Policy represents a key EU investment tool which has significantly and visibly contributed to the real convergence of regions and Member States within the EU and to the functioning of the internal market,” the group said. “The significant budget reductions” in the proposal “risk to hinder achieving its Treaty-based objectives.”

Their stance underscores tensions over preparations of the EU's next seven-year budget as its members have so far shown little progress in working out contributions and spending. The process has become even more complicated as the richer states want the budget hole caused by the U.K.'s planned departure to be covered by cutting development funding.

Read more: EU Leaders Fail to Make Headway on Their Trillion-Euro Budget

EU spending amounts to about 1% of the bloc's gross domestic product compared to national budgets averaging around 50% of domestic GDP.

EU leaders last month didn't make any headway in agreeing on a ceiling for the budget, putting at risk a self-imposed deadline to reach a final deal in December. Agreement on the volume of the funds is needed before deciding on what they should be spent on.

The poorer nations see the cohesion policy as a key tool helping them catch up with more developed countries, create jobs, address demographic challenges and allow for the reduction of carbon emissions.

The group also called for more flexible rules for allocating resources in accordance with their national and regional priorities.

--With assistance from Lenka Ponikelska.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Michael Winfrey, Nikos Chrysoloras

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