Richer EU capitals threaten to cut budget if lawmakers vote against reform

Good morning. A scoop to start: Nato allies are discussing a more forceful response to Vladimir Putin’s hybrid war, including arming surveillance drones, conducting exercises on the Russian border and changing engagement rules to more quickly destroy threats from Moscow.

And French President Emmanuel Macron has pledged to appoint a new prime minister by Friday evening, after last-ditch talks between political parties to avoid snap parliamentary elections.

Today, our economy correspondent reports on threats from capitals to cut funding to the future EU budget if the European parliament votes against a proposed new payout structure, and our Rome team has news of an Italian push to cut red tape for companies that hire highly skilled migrant workers.

Cash clash

Germany and other countries won’t pay more into the EU budget if the European parliament rejects a key part of the current budget proposal, tabled by the European Commission to make spending more flexible, writes Paola Tamma.

Context: The commission has proposed bundling together agricultural subsidies and regional funds, which traditionally make up two-thirds of the bloc’s budget, in the EU’s next long-term budget for 2028-34. The aim is to give countries more leeway on how to spend the money, addressing other priorities such as defence and competitiveness.

The two biggest groups in the European parliament, the centre-right European People’s Party and the Social Democrats, are toying with the idea of rejecting these new national plans, arguing they would result in capitals slashing funds for regions and farmers, according to officials.

“What we don’t accept is the renationalisation of the EU budget and that every member state can do what they want,” said Siegfried Mureşan, who leads negotiations for the EPP on the budget, adding that regional and agricultural policy should have “predictable amounts”.

But to formally reject the commission proposal would require a parliamentary majority, and even then the commission would not be forced to amend its proposal. Political groups need to decide whether to pull the trigger ahead of the next plenary session in late October.

While the threat is legally toothless, it’s political dynamite.

Germany and other countries that are net contributors to the EU budget have already threatened to close the spigot if the budget doesn’t reflect new priorities such as security and boosting growth.

“A status quo budget proposal favouring traditional spending areas would mean that member states have to invest more nationally to face [new] challenges. This would definitely leave less money for the EU budget,” said a German official.

“A rejection of the [EU budget] proposal would turn the whole negotiations into turmoil. It would be playing with fire,” they added.

Chart du jour: Davos in decline

The World Economic Forum in Davos is sailing against the wind. Multilateralism is in retreat, protectionism is on the rise, and great power rivalry — between the US and China, between the west and the global south — is remaking global governance.

Open for work

Italy is taking steps to make it easier for employers to get permission for highly skilled foreign workers to enter the country in a tacit acknowledgment of the labour shortage weighing on the country’s economic prospects, write Amy Kazmin and Giuliana Ricozzi.

Context: Prime Minister Giorgia Meloni’s government has vowed to crack down on irregular migrant workers trying to reach Italy from across the Mediterranean, a key plank of its political programme. But it is also simultaneously trying to make it easier for employers to bring in skilled workers to fill yawning gaps in the labour market, amid a wave of retirements in an ageing workforce. 

The Bank of Italy’s governor Fabio Panetta has warned that by 2040, Italy’s labour market will see its labour force shrink by 5mn workers, leading to a 11 per cent drop in GDP.

Under existing rules, when employers identify and want to hire a skilled foreign worker, they must obtain a nulla osta, or “no objection” certificate from Italy’s interior ministry. But employers have long complained about the complexity and duration for obtaining this clearance for prospective hires.

Yesterday, the country’s Senate approved a measure that will cut the time to obtain the permit to work in Italy from 90 to 30 days for workers with university degrees, or many years of experience in their trades.

The measure, which is expected to be approved by the lower house of parliament by the end of the year, is expected to help companies import much-needed IT specialists, industrial technicians, skilled construction workers and other trained, experienced employees more rapidly. 

Senator Andrea De Priamo, a member of Meloni’s Brothers of Italy party, is among those backing the measure: “It is clear that in some sectors, as often pointed out by businesses, quotas of trained foreign workers are very essential.”

What to watch today

1. European commission president Ursula von der Leyen and other EU leaders speak at the Global Gateway Forum in Brussels.

2. EU finance ministers meet in Luxembourg.

3. EU digital affairs ministers meet in Horsens, Denmark.

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