Future of the V4 countries: 25% less cohesion funding after 2020

editor: REMIX NEWS

Good evening and happy new year to all our viewers. This is the V4, the show covering the Visegrád Four, for the first time in 2019. In recent years, Central European countries have been facing serious challenges. These countries have been subjected to numerous attacks because of their migration policies, and the attacks are likely to continue in the future, primarily in European politics. Bringing the French military industry into an advantageous position is behind Emmanuel Macron’s ambition to create a European army, according to political scientist Eszter Petronella Soos in an earlier show of ours. We also talked about the possible economic effects of Brexit with Csaba Szajlai, Deputy Editor in Chief of Figyelő, and Dávid Szabó, an international politics analyst. Here is a summary of these discussions.

What is Emanuel Macron’s goal with the V4?

Right after taking office, the V4s became a focus of Macron’s presidency. We remember his tour about posted workers and the new directives concerning them. At that time the official French communication was that the goal was not to divide but to bring as many Central Eastern European member states as possible behind the French proposals. Back then they said that they wanted to avoid the appearance of the Western–Eastern divide. To give a little background, I think it is very important to understand that the consequences of the 2004 EU enlargement in some parts of the Western population are not popular because they meant the appearance of social dumping and the appearance of a cheap Eastern workforce. There was an internal political logic behind the fact that Emanuel Macron began his activities with this directive. This is one of the issues that can be understood from a French point of view. The other one is that Macron made a promise to try to visit every European capital. We can see that the visits to Warsaw and Budapest are being procrastinated. A year ago, Macron’s visit to Hungary was being planned. It seems that the V4 is a flexible cooperation, and when it comes to common interests and common opinions, this alliance can act together relatively smoothly, but when there is not a common interest, then naturally everybody represents his or her own national interest. Macron tries to play with this. We’ve seen him trying to use another group in the Council voting, the Slavkov cooperation, which is composed of Slovakia, Czech Republic, and Austria.

Let us clarify one more question. I wonder what the demand is today for the two-speed Europe. And, the other question is, if the goal of Macron’s last visit was to disrupt the countries of the Visegrád Four, what are the most obvious signs of his attempts to disintegrate the alliance?

These questions are related. The two-speed Europe is one of the central elements of Macron’s European program. The idea here would be that the eurozone has a separate parliament, a separate minister of finances, and a separate budget. Obviously, Germany’s accordance and enthusiasm would be essential for this plan. So far, this is limited because Germany would have a restrained interest in excluding its own economic hinterland from core Europa. This is basically the case, and it is clear that the situation in Slovakia is very different because it already introduced the Euro in 2009, but the Czechs still hesitate.

Is this a reason for Slovakia to be invested in belonging to core Europe?

The Czechs have hesitated several times. They are talking about whether or not a V2 + 2 formation is possible in this case. I would very much like to point out that the issue of the eurozone is an issue of oscillation in the V4, but in other cases, this block is able to act in a coordinated fashion. Honestly I believe that the real question about the eurozone and core Europe is whether or not the Germans are willing to invest money in it. This is a very important question of this election, and following the election it can be back on the agenda. I am in an awkward situation as an analyst, because there is a German chancellor who announced her resignation from the CDU, and we hear a lot about, and it is my feeling too that Angela Merkel might not complete this cycle.

My instincts also say—and the various statements we hear and the various processes we see also reinforce this belief—that the weakening of Angela Merkel can also cause Macron’s weakening. Do you agree with me?

If the next chancellor has a very orthodox position on the eurozone question and does not show any flexibility—and remember that German citizens have not been enthusiastic about spending German money on other countries since the Greek crisis—then Macron’s program on Europe might suffer a huge setback. This is why this is a very important election for Macron. He will need to send a group to the parliament that has the capacity to exercise pressure. This is his investment in the elections.

Petronella, back to the point of Macron’s purpose of disintegrating the V4. Do you think that his attempts were met with reception in the affected countries of the V4, I mean primarily Slovakia and the Czech Republic, whom he tried make his allies against Poland and Hungary, the conservatives?

I think that this is more about the countries’ interests. The Czechs and the Slovaks may be separated on the issue of the eurozone. Russia can be another question. I think that in certain cases, and first of all I am thinking of migration, this block can effectively act together, even though there are small differences in politics, and an instance could be the Slovakian refugee policy. However, when it comes to voting and to representing the common interests, then these countries can cooperate. There are different legal proceedings going on in the case of posted workers, and there seems to be coordination even from the side of member states who back then showed receptivity in rhetoric. This I can explain with a very simple reason. Since nobody yet knows what Europe will be like after next May, what can and what cannot be done, it is also reasonable that some Member States want to leave the doors open.

At the EP session in Strasbourg, Angela Merkel said that we need to consider creating a European army. Earlier, Emanuel Macron also had mentioned this as well, and Viktor Orbán also raised the same possibility in his 2016 speech in Tusványos. Going back to Macron, what could his real intentions be? We have already clarified his domestic political situation, but where does he see himself in the future, and what does he pursue at the European level?

Macron gave a speech last September in Athens in which he explained that he saw Europe as a system of geopolitical relations. He thinks that Europe should be strong and sovereign vis-á-vis other super powers. This reflects what the Hungarian Prime Minister says about Europe being rich but weak, hence the demand of the European army. There is a geopolitical vision, but of course there is a narrower national interest, and this is the interest of the French military industry. Emanuel Macron told CNN in an interview that he did not want the EU to spend the joint army and defense budgets on American weapons. It is not difficult to see the natural interests of the French military industry behind this statement.

Do you agree that a possible hard Brexit would primarily in the long term and indirectly strike the countries of the region, especially the Czech Republic?

We could say that “one eye is crying and the other is laughing” since what we are talking about means that the Central and Eastern European countries, the V4, are embedded in the economic mechanisms of Western European. In general, the export volumes of the Hungarian, Polish, Czech, and Slovakian manufacturing industries are large. I am going to present a number to the viewers, although it is not of Britain, but of Germany, which has one of the largest economies and is one of the largest export powers in Europe. In Central and Eastern Europe, the volume of imported goods is 13.4%. This is a huge amount considering the state of these economies in 1990. But, with regard to Brexit, the Czechs are more embedded in economic relations than the Hungarians. The Czech exposure is greater, but ours is great too. The whole region has more or less the same data. If a hard Brexit prevails, it will first of all be the processing industry that will have a strong impact on the Czech economy. As far as Hungary is concerned, the country in this respect may suffer fewer losses even in the case of a hard Brexit, since roughly 5% of our commodity turnover accounts for our annual export base to the UK. It is probable that this wound could be repaired in the Hungarian economy.

Before hearing the director’s opinion, let us clarify for the viewers what exactly a hard Brexit means. It would mean that after Britain leaves the customs union and the common market, it could only trade with the member states of the European Union according to the WTO rules. This would result in the increase in duties on foreign trade and other costs, and I also read that it would lead to a drastic change in migration policy. What is the correlation?

The correlation is that British migration policy in this case would be forced to look for other resources instead of the highly-skilled, risk-taking, and aspiring Central-Eastern European workers. Britain would be forced to turn back completely to the workforce of the British Commonwealth or former British colonists. From this point of view, it is very interesting that those who were campaigning for Brexit specifically because of the immigration policy eventually could create virtually greater immigration as a result of the process. And, about the other part of the question, the conditions Anett described would actually mean a super hard Brexit, and such hard conditions would make us concerned too. Even in case of a hard Brexit, that is without British membership in the customs union and in the common market, we would like to minimally create a free-trade zone or a similar cooperation between the European Union or European Economic Area and the UK. It is in the interest of all of us. This is also emphasized by the British. Even those in favor of a hard Brexit emphasize the need for a free trade agreement with the European Union, but it is also necessary to establish such agreements with the rest of the world, notably the United States, and also with the successor states of the British colonial empire or with East Asia.

In fact, in the economic and political sense, it is a stalemate. We are member states of the European Union, so it cannot work that the British quit but keep all kinds of advantages. Earlier, there were plans that the British would have an agreement with the European Union based on the Norwegian or Swiss example. This is quite the challenge that they presented to the European Union’s decision makers. I think that the European Union must be firm, as Brexit affects the 27 member states. Keep in mind that Great Britain is in a special status as a net contributor to the European Union’s common budget, but they can reclaim a lot and enjoy special treatment as well, just like Denmark or Sweden.

March 29th is still far away, but we know very well that British domestic politics have been subject to the negotiations of Brexit. Some say that Prime Minister Theresa May’s stability has been wavering. Indeed, the issue is far from being over. Meanwhile, during our conversation we are showing a graph to the viewers. The population of the countries of the Central and Eastern European region is primarily interested, beyond the economic indicators, in what will happen to the workers. Here is the chart. It shows the number of registered workers in Great Britain in 2017. How would the current Brexit terms protect the interests of the region’s workers?

The British say that in fact everything will remain unchanged, as far as labor market conditions and regulation are concerned, but this is still awaiting refinement. The Hungarian national interest, on the other hand, is to have more people come home to Hungary or closer to Hungary from those who are working in Britain. It is natural to be worried about Hungarian workers in the UK, but we need to see that they are contributing to the UK’s GDP. We Hungarians are interested in solving the tight labor market problems in Hungary. It is highly likely that the British interest is to regulate the labor market in a liberal way, since it would mean a huge cut if they applied new rules. But, it is certain that the current EU regulatory system will not work.

Our next topic is the EU budget that we can expect after 2020. The European Parliament adopted the negotiating starting points for the post-2020 budget last week. We’ll continue after a short summary.

Based on the proposal of the European Commission, the Visegrád countries will have about 25% less cohesion funding after 2020 than in the 2014–2020 cycle. The committee’s proposal affects the V4 negatively because the Visegrád countries are among the 11 major beneficiaries of EU funding, and these resources cover most of their public investment. Due to the economic needs caused by Brexit and immigration, the Commission revised the system for allocating aid from cohesion funds and put in place criteria in the resource allocation system for efforts in the areas of unemployment, the relocation of immigrants, innovation, and the reduction of carbon dioxide emissions. Brussels decision makers also noted that the drop in funding provided for the V4 is to some degree the price of the region’s economic successes. The change in conditions is thus partly a result of the dynamic development of Central Europe, to which the funding received over the last two fiscal cycles contributed greatly.

Does the EU argumentation stand?

Well, to me it seems to be a little bit circumlocutory at first glance. The experts of the European Commission say that the Mediterranean countries need to catch up because since the 2008–2009 global economic crisis, they are still in a lousy situation, as they cannot reach the level of economic output as before 2008. By contrast, the Central European countries, namely us, the Poles, the Slovaks, and the Czechs, can grow quite well. The region is performing astonishingly. At the same time, the argument that the Mediterranean countries need to be supported now is not entirely correct, as the level of development of the Mediterranean countries has not yet been reached by the Central and Eastern European region. The best indicator of this is the GDP growth rate. In this respect, perhaps the Czechs are ahead of a Southern European country, namely Portugal, but Hungary could not pass nor catch up to neither Spain nor Italy in this respect. Greece has fallen far back, so they are probably not a point of reference. The essence is that the Central and Eastern European region must be helped in order to catch up. We have not benefited from the funds and income that the Mediterranean countries have. In fact, we now get much less money than these countries received in the 80s to assist them to catch up. So, I see not entirely professional reasons but a kind of political pressure. We all know that there is a Polish case, a Slovak case, and a Hungarian case before the European Commission and the European Parliament. I think that there is sort of a regulation factor in this story. At the same time, we have to keep in mind that the situation is not yet completely final.

Are we being punished?

Well, some would like us to be punished. I believe that the countries of this region have realized their power after more than ten years of European Union membership. They are able to use the European cohesion and structural funds so that they can make a real contribution to the quality of life of those living here and to economic growth, while at the same time the Western European net contributing elite also benefit from cohesion policy. So, this is a success story. To knock over or diminish a success story can be only of interest if there are other political considerations beneath the surface. This is how I interpret the case. These states that came to power and consciousness now do not want to stand behind the globalist future envisioned by Brussels, and, therefore, Brussels is trying to put political pressure on them. We do not have to complain but have to actively get involved in coalition building and fight to defend our interests.

Dear viewers, with the news of the Visegrád Four, we are counting on seeing you next week. Thank you for being with us and goodbye.


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