The budget of the European Union often works at two speeds: companies and municipalities quickly secure money from EU funds. Many of the planned projects are then implemented quite slowly.
The wave of financial commitments that the EU Commission is putting off is getting bigger and bigger: According to an internal commission report available to SPIEGEL, a total of 464.5 billion euros were reserved in the EU funds for planned projects at the end of October. 228.3 billion euros of this has not yet been called, although the budget period ends on December 31st. This corresponds to a payout ratio of 51 percent.
In some funds, the rate is even significantly lower:
According to the Commission’s report, around 2.3 billion have been reserved since the 2007-2013 budget period. These are mostly funds that have not yet been paid out due to legal disputes.
If you add delayed payments in major projects such as the ITER nuclear fusion project or the Galileo satellite program, the arrears currently amount to around 300 billion euros. By the end of the year they could even swell to up to 308 billion euros, according to a classified document for the Bundestag, which SPIEGEL also has.
The arrears in the EU budget have more than doubled since 2007. Payouts of funds that have long been reserved from the current budget are likely to extend well into the coming budget period, complained the Court of Auditors.
To some extent it is normal to set aside funds for longer term projects. Some only cause higher costs over time, but have to be financially secure. The earmarked funds have also grown because the EU budget has also grown larger with the accession of new member states, notes the EU Commission.
But that only partially explains the problem – and fails to appease critics.
The European Court of Auditors issued a warning in 2019 in an analysis of “considerable risks” for the EU budget. Monika Hohlmeier, the chairwoman of the budget control committee of the EU parliament, speaks of a “highly problematic” situation.
“The earmarked funds make up around 28 percent of the total budget for the years 2021 to 2027,” says the CSU politician, who is a member of the European People’s Party in the EU Parliament. “In addition, interest payments for bonds to finance the European Corona reconstruction fund will soon have to be repaid from the EU budget.” The budget is being squeezed in from two sides.
Left-wing politician Lorenz Gösta Beutin complains that the slow call for funds makes it difficult for the EU to pursue its political goals. “A Europe-wide energy transition, organic agriculture, the promotion of small and medium-sized enterprises, the fight against unemployment, poverty and inequality: all of this is delayed because tax money is lying around unproductive.”
In fact, the EU citizens, EU companies and EU municipalities, which should actually benefit from the funds, are left behind:
Im European Social Fund Instead of the planned 88.6 billion euros, only 41.9 billion euros have been invested so far to help people find a better job and to integrate disadvantaged groups into society.
From the European Cohesion Fund, which is intended to promote the expansion of renewable energies, rail transport and improved connections to transport systems, among other things, only 32.3 of the reserved 61.9 billion euros have so far been called.
The Aid Fund for the Most Deprived, whose aim is to provide the poorest in the EU with food, clothing or soap, has called in around 1.7 billion euros less than would have been possible.
“Silent Household Scandal”
Left-wing politician Beutin speaks of a “silent budget scandal”. The Federal Government must use its EU Council Presidency and start an initiative to reform the budget rules.
The main reason for the budget arrears are the comparatively long deadlines for calling up EU funds. The so-called N + 3 rule usually applies, i.e. the registration year plus three additional years. For example, anyone who secured money from an EU fund in March 2017 would not have to access them until New Year’s Eve 2020.
In previous households the deadline was one year shorter (N + 2). The extension was introduced in the wake of the financial crisis in order to accommodate states whose administrations were overwhelmed by the – sometimes unnecessarily complicated – allocation of funds from EU funds (and probably also to cushion the pressure of the crisis a little).
The N + 3 rule initially only applied to some EU funds and states. In the multi-annual budget for 2014-2020, it was then extended to all states and funds. “As a result, the funds that were not called skyrocketed,” states the Court of Auditors.
The German government is anything but enthusiastic about the high backlog. You could be an “indicator of a sluggish call for funds,” it says in the classified information for the Bundestag. In the EU budget negotiations, the government is therefore campaigning for a return to the N + 2 rule, but in some cases is meeting with “strong resistance”.
Resistance comes mainly from states whose administrations would still have problems with shorter deadlines. According to insiders, Italy, Malta, Croatia, Romania and Bulgaria, among others, belong to this problem group.
The Federal Republic also has a comparatively low response rate. However, the German administration would largely be able to cope with shorter deadlines, according to Brussels.
Structurally weak states, however, should apparently be given some time to modernize their administration. At the same time, the allocation of funds from EU funds is to be reduced to some extent.
A quick return to the N + 2 rule is therefore not to be expected, according to EU circles. At the moment it looks like the deadlines for EU funds will not be cut again until 2027. At the earliest.
The backlog in the budget is likely to continue to swell by then.