Funding in exchange for reforms: EU signals end of 'easy' money for poor countries
Kyiv • UNN
Starting in 2028, the European Commission plans to introduce a "cash for reforms" model to allocate funds to poorer EU countries, linking funding to reforms and compliance with democratic standards.
The European Commission has supported a group of governments, including the German one, which refused to finance expenditures through additional loans and proposed to stop funding the poorest EU countries without additional conditions. UNN writes about this with reference to Politico.
Details
The newspaper writes that this means the end of the era of free money - when the bloc's huge recovery fund was made up of shared debt rather than national contributions, and when EU funds for things like new roads, hospitals, and renewable energy projects were allocated mainly to Eastern and Southern European countries without requiring any reciprocal obligations.
Starting in 2028, the European Commission may introduce new mechanisms for allocating money for various programs. The Commission will put forward a formal proposal in the summer of 2025, which must be unanimously approved by governments by the end of 2027.
For some poor countries, the Commission will propose a "cash for reforms" model. The Commission believes that such an instrument will force governments to implement reforms on a range of issues, including pension reforms and compliance with democratic standards, which have been postponed for years.
This would mark a departure from the current model, where funding is provided based on agreed criteria rather than for achieving specific goals.
European Commission officials acknowledge that they will have a hard time selling the new model to poorer member states. One official told the newspaper that countries currently struggling to utilize the funding are unlikely to welcome stricter rules and closer ties to reforms.
However, analysts point out that countries will ultimately not have enough leverage to resist the new rules. The need for fresh money to stimulate growth in countries awaiting accession - such as Ukraine and the Western Balkans - and to repay post-pandemic debt could undermine calls for a larger budget.
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