East Germany loses out in new EU budget

Eastern Germany looks set to lose over €3bn in EU funding targeted at Europe’s poorest regions under a new Brussels finance framework.

Under the 2007-2013 EU budget eastern Germany will receive €3.7bn less in subsidies than in a financing package agreed seven years ago.

The issue is a sore point as Germany, with Europe’s largest economy, contributes more to EU coffers than any other country.

The former Soviet run part of the country will now have to make do with €14.3bn in EU handouts as Brussels cash flows further east.

When ten new, mainly poorer, EU members, including eight formerly Stalinist countries, joined in May 2004 average European GDP took a 12 per cent tumble.

The lower average GDP made it harder for poor German regions – and other areas in Spain, Greece, Italy and Portugal – to trigger poverty thresholds for regional aid.

The issue is to be compounded after Bulgaria and Romania join in 2007 and as EU funds are allocated throughout the seven year finance period.

“Phasing” measures have cushioned the pain for eastern Germany but even so in 2007 the new EU will take an extra 20 per cent share of the overall cash.

This year poor EU15 areas secured the lion’s share, 77 per cent, of cohesion and structural funds – an important source of funds for parts of east Germany to keep up with the west.

Next year the EU10 take 40 per cent, Romania and Bulgaria four per cent and the EU15 just 56 per cent, a trend that will accelerate in future years.

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