EU proposes more spending on Italy and south, less in east

By Francesco Guarascio

BRUSSELS (Reuters) - The European Union's executive proposed on Tuesday to spend more of the bloc's money on Italy and other southern states hit by the economic and migration crises, while giving less to the former communist countries of eastern Europe.

The proposal on the 2021-2027 budget, which details plans announced a month ago, comes as Italy faces snap elections, which polls show could further strengthen eurosceptic parties.

The budget, the first since Britain voted to leave the EU, would increase to 1.1 trillion euros (£957.51 billion) from 1 trillion euros in the current seven-year period. A third of spending would be allocated to the "cohesion policy", which helps reduce the gap between rich and poor regions of the bloc.

The European Commission proposed a new methodology to distribute funds that takes into account unemployment levels and the reception of migrants, and not just economic output as previously.

That will mean lower allocations for eastern European countries. But Corina Cretu, the EU commissioner for regional policy, said this was because their economies have grown faster in recent years, and they have overcome the global financial crisis better than others in the EU.

"The natural consequence of getting richer is a gradual decrease in cohesion policy support. This is a fact and in the end is a good sign," she said.

The EU is also at odds with nationalist governments in Poland and Hungary over moves to limit judicial independence and free speech, and has threatened to withhold funding for flouting democratic standards. But EU officials described Tuesday's formula as based on economics and not linked to those disputes.

Southern states, who are still struggling to fully recover from the financial crisis, will see an increase in funding.

In an overall draft budget of 373 billion euros for cohesion between 2021 and 2027, 72.7 billion would be allocated to Poland, the highest share among EU states. But that represents a reduction from the 82.1 billion euros committed to Warsaw in the current seven-year budget period.

Polish Prime Minister Mateusz Morawiecki said his government would oppose the proposal. Poland's neighbour Lithuania, which would also see a big cut, said it was "not acceptable".

Hungary would see its regional funds drop to 20.2 billion from 23 billion. Meanwhile EU funds for Italy's poorest regions would increase to 43.4 billion euros from 35.1 billion. Spain will see an increase to 38.3 billion euros from 31.2 billion and Greece to 21.6 billion from 17.3 billion.

Greece, Italy and Spain face double-digit unemployment, while jobless rates are below 5 percent of the workforce in Poland, Hungary and the Czech Republic.

Italy and Greece are also the bloc's main first-arrival countries for migrants and refugees from the Middle East and Africa. Eastern countries, led by Poland and Hungary, have refused to host refugees under an EU relocation plan.

The Commission will publish in the coming days and weeks other detailed proposals on future expenditures on security, research and other budget headings.

Unemployment rate in selected EU countries - http://fingfx.thomsonreuters.com/gfx/editorcharts/EU-BUDGET-FUNDS/0H0012Y4W0YP/index.html

Allocations of regional funds proposed by the EU Commission - http://fingfx.thomsonreuters.com/gfx/editorcharts/EU-BUDGET-FUNDS/0H0012Y4X0YS/index.html

(Reporting by Francesco Guarascio, additional reporting by Marcin Goettig in Warsaw and Gabriela Baczynska in Brussels; Editing by Larry King and Peter Graff)