Frugal EU states seeking budget cuts are shooting their own regions in the foot

Six frugal countries this week circulated a letter threatening to block a deal on the next EU budget unless “hundreds of billions” of euros in spending was cut. The Dutch and Germans, ever the most zealous keepers of the frugal flame, want to redirect what remains away from regional and farming funds, towards innovation and defence. For those following EU fiscal debates, this song will sound familiar. So-called ‘net payer’ countries have never liked sending money to the economic periphery. In 2013, after a year of bickering, Britain, Germany, and the Netherlands killed a European Commission plan for a five percent increase and pushed through the EU’s first-ever budget cut, with farm and cohesion funds taking the biggest hit. But new research suggests that the frugals may be shooting themselves in the foot. Last week, Olga Ivanova, a senior researcher at the Netherlands Environmental Assessment Agency (PBL), published a study in Dutch economics journal ESB calculating what EU money actually does for the Netherlands’ 12 provinces. And, for most of them, she found that the growth effect of EU investment outweighed their share of what the Netherlands paid into the budget. Using PBL’s own economic model, she traced 10 EU funding streams between 2013 and 2024, from Horizon science research grants to farm subsidies and regional development money. Across the Netherlands as a whole, provinces get back about 99 cents in extra growth for every euro paid out to the EU budget.