What EU countries fight about when they fight about the budget

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Good morning. A Financial Times analysis has found that Turkey’s exports of microchips and other critical goods for Russia’s war machine have soared this year, disrupting EU efforts to curb Moscow’s ability to arm its military.

Today, I’ve got an overview of the latest faultlines in the fraught debate on the EU budget rebate (spoiler: they haven’t moved much). And my colleagues explain why France is critical of Chinese imports, but happy to welcome Chinese investors.

Disaster budget

The latest proposal on how to cover the EU’s ballooning budget needs once again showcases how tense things can get when it comes to anything involving a euro sign. 

Context: Capitals have been critical of the European Commission’s proposal to top up the EU budget by €100bn until 2027, including some €66bn in new funds paid by member states. About €50bn of the total would be earmarked for Kyiv, while the rest would go towards repaying debt, migration measures and other areas.

EU ambassadors yesterday discussed a proposal by the current Spanish EU presidency with different scenarios for repurposing existing funds to supplant fresh spending.

According to the paper seen by the FT, the EU could transfer money from a dedicated Brexit fund, a fund for workers displaced by globalisation and other areas — without touching precious agricultural funds and money for regional development.

Depending on how painful the cuts are, the EU could in this way scrape together up to €23.1bn, the paper estimates.

But member states were not that impressed with the proposal. Several EU diplomats said the discussion on redeploying existing funds needed to get more serious and cover broader areas of the EU budget.

“To be able to discuss further details, all pieces of the puzzle need to be on the table,” one diplomat said.

EU ambassadors also talked about an increase of disaster aid, for instance in cases of flooding. Countries including Italy, Slovenia and Greece have been hit by climate-related disasters this year.

Another EU diplomat said the proposal was needed “in any case, in order to ensure adequate EU capacity to respond to both . . . natural disasters within the EU and emergencies outside the EU”.

But countries such as Germany and the Netherlands say further discussions are needed on where to find the funds. Germany, the EU’s biggest net contributor, is in trouble over its domestic budget following a bombshell court ruling last week.

“If money were to grow on trees, we’d be fine with it,” a third EU diplomat remarked, adding that it was “very difficult to find fresh money for anything else than Ukraine”.

Aid for Kyiv seems to be the one area on which member states — except Hungary — agree. Yesterday’s approval by the commission to pay a first €900mn to Budapest from frozen funds might help discussions.

So prepare for long nights when EU leaders meet to seal the budget deal in December — with some diplomats saying they might fail and haggling continue into the new year. 

Chart du jour: Shock result

Far-right leader Geert Wilders’ victory in Wednesday’s Dutch elections is also a triumph for nationalist, anti-establishment politicians in other European countries. Although Wilders’ Freedom party may struggle to find coalition partners, the liberal-conservative VVD and the centrist New Social Contract have not ruled out working with him. Read our profile of Wilders, a man known for his xenophobic and Islamophobic views.

Home-made

France talks tough on trade with China, while at the same time rolling out the red carpet for Chinese investors, write Andy Bounds and Alice Hancock.

Context: France was one of the biggest advocates of the EU’s investigation into Chinese subsidies of electric cars sold in Europe. Paris now wants those same manufacturers to set up shop in the country.

Trade minister Olivier Becht told the FT in an interview that France was attracting huge amounts of investment in battery and car factories and was happy for Chinese companies to join in.

“We are open for the production of vehicles and of batteries in France. So everybody is welcome to produce in France and add jobs — American companies and Chinese companies,” Becht said.

Stellantis, which owns Peugeot of France, is exploring a partnership with China’s CATL to build low-cost electric car batteries in Europe.

Becht said France had also attracted ProLogium of Taiwan to invest €5.2bn, creating 3,000 jobs. “Sustainability is our priority,” he said.

Meanwhile, China remains livid about the bloc’s probe into its exports.

At an event in Brussels yesterday, Fu Cong, China’s EU ambassador, said the anti-subsidy investigation was “not fair”, adding: “We know that the two sides are also talking on this. We do hope that common sense can prevail.”

However, Maria Martin-Prat, deputy director-general in the European Commission’s trade department, disagreed: “We don’t have a problem with anyone selling goods [in Europe]. We have a problem when there are practices that distort the level playing field.”

What to watch today

1. Second day of EU-Canada summit.

2. EU ministers for culture and sports meet in Brussels.

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