Post Brexit EU Budget: EU agrees budget to focus on defence, security and migration - by Eszter Zalan

EU leaders agreed on Friday (23 February) to spend more on defence, security and "stemming illegal migration" in the next long-term budget, European Council chief Donald Tusk said.

After leaders held their preliminary discussion of the first post-Brexit budget, Tusk told reporters that many European heads of government were ready to contribute more money to the next budget cycle, that runs 2021-27.

"All the leaders approached [the budget] with open minds, rather than red lines," he stated.

Tusk however said that the EU Commission's ambitious deadline for reaching an agreement by the end of this year seemed "really difficult".

The EU executive wants to conclude talks by the next European elections in May 2019, however, haggling over the budget usually takes more than two years.

Germany's Angela Merkel said the debate was "constructive", and said leaders will decide how fast to move with agreeing to the EU budget after the commission's proposal will be published in May.

The German chancellor also warned cuts will have to be made to "bureaucratic" policies, like agriculture.

One of the countries that does not want to pay more after the UK leaves the EU, the Netherlands' PM Mark Rutte, said the bloc needs to modernise and reform existing programs to finds more money.

"We, in any case, do not want our contribution to rise," he said.

EU leaders also discussed the possibility of linking EU funds to migration and respecting the rule of law.

Donald Tusk told reporters the discussion was less toxic than many had speculated in the run up to the summit.

Member states that benefit from cohesion funds earlier warned against using EU money aimed for reducing economic differences across the EU for integrating migrants or for punishing countries that breach EU rules.

After the discussions Tusk said that he had only heard "positive reactions", and that the concept was not questioned by any leader who spoke.

Tusk said that Poland's premier Mateusz Morawiecki also said he was ready to support conditionality, adding that it should be built a very objective criteria.

"The possible conditionality was less controversial than expected," Tusk said - adding that the debate at this point was very general.

France's president Emmanuel Macron had a strong warning to those who infringe EU values, something Poland had been accused of by the commission.

"It would be matter of good sense to halt the payment of some [EU] funds where is there is a breach of our values," Macron said.

Read more: EU agrees budget to focus on defence, security and migration

Italy: EU Offers Italy Budget Leeway to Pay off Commercial Debt Arrears - by Eva Palumbo and Christopher Emsden

The European Commission is considering allowing Italy to pay its suppliers around 70 billion euros ($91.52 billion) in arrears, giving the euro zone's third-largest economy much-needed-liquidity while allowing the government some leeway in how to account for the funds.

European Commission vice presidents Olli Rehn and Antonio Tajani said Monday they would consider liquidation of Italy's overdue commercial debt a "mitigating factor" in budget assessments, signaling that Rome wouldn't be forced to make offsetting adjustments to its budget or public debt levels.

Prime Minister Mario Monti said the decision was the result of last week's European Council, where national leaders sought to find growth-boosting measures without abandoning fiscal rigor.
Mr. Monti noted that his government had been working for more than a year to achieve such a breakthrough.

Italy has around EUR80 billion in unpaid bills and small companies around the country are collapsing because they lack funds to operate even though they have delivered goods and services to the public administration.
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Mr. Monti's government had floated a scheme to settle pending invoices, but apparently only EUR3 million has actually been paid.

Technically making use of the new leeway may take time, however. Mr. Rehn and Mr. Tajani said the European Commission "would welcome the provision of more detailed and timely information on the current stock of debt by level of government."

Read more: EU Offers Italy Budget Leeway to Pay off Commercial Debt Arrears