Estonia ready to lose funding if Ukraine joins EU, prime minister says

Estonia is ready to eventually become a net contributor to the EU budget if Ukraine joins the bloc, according to the Estonian prime minister, who called on other EU countries to start work on budgetary reforms that would enable Kyiv’s membership.

The EU could add up to nine new members, including Ukraine, in the coming years as part of a strategy shift prompted by Russia’s invasion of its neighbour, The Financial Times reports.

But member states are only just beginning to grapple with the task of reforming the bloc to facilitate such a change, including exploring the potential impact on its budget-sharing rules.

Kaja Kallas, Estonia’s prime minister, said the country was prepared to lose access to cohesion funds — a pot of cash to help poorer members develop their economies — “in the long run”. But she anticipated there would be an extended period of time to make the shift.

“Eventually it will happen, but not immediately,” Kallas told the Financial Times.

The FT revealed last week that an internal EU study has estimated Ukraine would be entitled to almost €190bn over seven years under the current budget structure, converting “many” countries from being net recipients of EU funds to net contributors.

Estonia was one of six countries mentioned in the EU council paper as losing access to cohesion funds should Ukraine and other would-be members, such as Moldova and six countries in the Western Balkans, join without the budget rules first being amended.

“We have to discuss this, what are the rules, how this money is distributed and what we get in exchange,” Kallas said in an interview on the sidelines of a gathering of EU leaders in Spain last week, where the topic was discussed by all 27 for the first time. “Nobody . . . says that we don’t need to reform anything. The question is how much? And what exactly?”

Kallas added that it was “not the idea” for member states to simply see the EU as a vehicle for money.

Ireland’s Taoiseach Leo Varadkar echoed Kallas’ remarks, saying last week: “It’s really important that when we look at these [enlargement] questions we don’t see them as just a financial calculation.”

He added that enlargement often took “more than 10 or 15 years” from when a country obtained candidate status, at which point the budget would be “in a very different place”.

Multiple EU leaders referred to the FT’s report on the Council enlargement study during the discussion in Spain, according to people briefed on the private discussions. While officials have said they disagree with the exact calculations, many cite the study as proof that the current system would be unsuitable following an enlargement.

Taras Kachka, Ukraine’s deputy economy minister, said last week that he understood the EU would have to conduct “a complex reassessment” of its Common Agricultural Policy (CAP), which subsidises farmers, before the country joined the bloc.

The council study estimates Ukraine would be the biggest CAP recipient, at €96.5bn over seven years, forcing cuts of around 20 per cent in payouts to existing member states.

“It is clear that in an enlarged Europe, the CAP and [its] allocations, as well as cohesion policy, will not be able to remain as they are,” said a French official. “Either we reallocate from the [existing budget], or we look more broadly at increasing Europe’s budgetary strength through our own resources.”

Kallas said the topic of how to reform the funding and payment rules to prepare for enlargement “has been touched very lightly and very gently” by leaders so far.

“I hope it’s not going to be that the big ones will discuss among themselves and actually not listen to the others,” she said. “If we want to have something that everybody’s on board with, then you have to listen to everybody.”