BERLIN, April 6 (Xinhua) -- Plans supported by several Western European states including Germany to cut European Union (EU) funding to poorer regions in the east of the bloc could backfire, a report published on Friday by the magazine SPIEGEL warns.
According to SPIEGEL, a reduction or more selective distribution of so-called EU structure or cohesion funds could harm German exports to poorer neighbouring countries such as Poland and the Czech Republic.
The EU Commission and the national governments such as Germany, Italy and France have all expressed a desire to introduce greater conditionality into existing system of regional subsidies.
Resulting savings in the transfer of cohesion funds could help make up for a forecasted annual budgetary shortfall of circa 12 billion euros (14.7 billion U.S dollars) from 2021 onwards which will be caused by Britain's decision to leave the bloc.
Additionally, several Western members hope to pressure members of the "Visegrad" group, including Poland, Hungary, the Czech Republic and Slovakia, to refrain from right-wing populist policies, uphold the national rule of law, and comply with EU directives by curtailing their access to EU budgets.
The EU currently spends around 50 billion euros each year, a third of its total budget, to promote the economic development of poorer member states and regions. Visegrad countries receive the lion's share of the money and have attracted growing criticism from major net contributors to the cohesion funds in Western Europe who accuse the likes of Warsaw, Prague and Budapest for refusing to accept their legally-binding share of refugees under the European asylum system.
"SPIEGEL" noted on Friday, however, that there was little clarity over how the transfers could actually be made more conditional on legal standards. "One cannot punish a population for the behaviour of its government", Corina Cretu, EU Commissioner for Regional Policy told the magazine.
Furthermore, halting the flow of EU cohesion funds to Eastern Europe could have a boomerang effect on growth in Western Europe. The EU Commission estimates that a quarter of gross domestic product (GDP) expansion in net contributor countries between 2007 and 2013 was attributable to indirect positive effects of the controversial subsidies.
"Of every Euro that Berlin sends to Brussels, up to 70 percent are returned to German industries in the shape of new international orders", a statement by Guenther Oettinger, EU Commissioner for Budget and Human Resources, read. A recent study by the Munich-based Ifo Institute for Economic Research found that German incomes rose by nearly 120 billion euros since 2014 due to the existence of the European single market, making Germany the by far biggest beneficiary of internal trade.
"SPIEGEL" cited an unnamed EU official who warned that Berlin should "be more honest" about the fact that it could end up shooting itself in the foot with a punitive reduction of cohesion funds for Visegrad governments. Any attempt to raise the threshold under which cohesion funds can be applied for would have to hold throughout the entire EU and could therefore mean that poorer regions of Eastern Germany would be left worse off as well as a consequence.
In spite of these risks, it is widely anticipated that the EU Commission will at least propose to make regional transfers contingent on the fulfilment of rule-of-law criteria in the near future. Brussels fears that a failure to do so would further embolden Visegrad states to act in contradiction of EU principles and laws, as well as contributing to Eurosceptic sentiment in the countries which are already net contributors to the bloc's budget.
Commissioner Cretu emphasized on Friday that a loss of access to subsidies could also be interpreted as a sign of "economic progress." She pointed out that Polish GDP per capita was measured at less than 50 percent of the EU average when it first joined the EU in 2004 and has since risen to 75 percent of the average.
If the EU decided to raise the threshold which determined access to cohesion funds accordingly, Poland would no longer have a "right to subsidies, statistically and economically-speaking" and could hence not claim to be a victim of "punishment." Nevertheless, Cretu admitted that such a move might still contribute to a further alienation between Eastern and Western European populations.