The Czech Republic will take more from the EU than it will send to it for many years to come

European money started flowing into the Czech Republic before 2004. It gradually contributed significantly to the development of the regions, especially the poorer ones in the border areas. Thanks to funds from European funds, cities bought trolleybuses, trams, buses, repaired roads and sidewalks. Subsidies also enabled the reconstruction of schools, the modernization of hospitals or the construction of treatment plants and sewers, billions were also drawn by industrial and agricultural enterprises.

However, the distribution of subsidies was also accompanied by hundreds of cases, some of which are still being resolved by the courts today. Subsidy fraud and corruption scandals have always attracted the attention of the media, but according to the investigation of the Supreme Audit Office, financing of projects with unclear benefits was a major problem. During the first ten years of its membership in the Union alone, the Czech Republic made it possible to build at least fifteen golf resorts and thirty wellness centers for poorer regions for billions.

The Czech Republic illegally provided subsidies to large farmers, and is demanding them back

Economy

The Czech Republic receives an average of 100 to 150 billion crowns per year from the EU budget, while our contributions to the EU budget amount to 50 to 70 billion crowns. “Each year, thanks to the EU budget, the Czech Republic has approximately 70 billion crowns at its disposal, which is more than the annual budget of most of our ministries,” points out Petr Zahradník, an economist at Česká spořitelna.

The Czech Republic receives more from the EU budget than it contributes to it, and this will not change for many years. From joining the EU in May 2004 until the end of last year, according to data from the Ministry of Finance, a total of 876.6 billion crowns were paid into the European budget. Revenues for the same period were two trillion crowns. The so-called net position of the Czech Republic during its membership in the Union amounts to 1.12 trillion.

“Two thirds of the funds were used for the purposes of cohesion policy, i.e. for the development of individual regions. Approximately a quarter of the budget is directed to the implementation of the common agricultural policy, and the rest is funds for centrally managed programs, for example the program for science and innovation,” described Zahradník.

According to him, revenues from the EU budget have a significant macroeconomic impact. Since joining the EU, the funds will bring a cumulative performance equivalent to forty percent of the gross domestic product, added Zahradník.

The MMR also subsidized non-purposeful and wasteful projects in the tourism industry, the SAO said

Homemade

Last year, the Czech Republic received 89.5 billion crowns more from the European Union budget than it spent. Last year’s net position of the Czech Republic vis-à-vis the EU was the best in the last eight years.

In addition, the Czech Republic will receive a total of over a quarter of a trillion crowns from the EU Modernization Fund, for example for investments in energy or transport. According to the Ministry of Finance, funds from the Modernization Fund are not included in the net position statistics, as they are specific funds, the source of which are revenues from emission allowances.

“The net position should increase further, as it is temporarily strengthened by funds from the EU New Generation instrument. In addition, our economy is still among those converging with some less developed regions,” ministry spokesman Petr Habáň told Novinkám.

The reason why, contrary to expectations a few years ago, the Czech Republic will still remain a net recipient, i.e. that it will take more from the Union’s coffers than it will put into it, is also its economic stagnation in recent years. Individual regions of the Czech Republic are becoming richer relative to other EU regions more slowly than they were before the arrival of the covid pandemic and than what was expected in the future. They will therefore not simply reach the European average of gross domestic product, the achievement of which means the loss of the right to draw subsidies from some EU funds.

“I believe the clean sheet will be ours for a very long time; definitely also for the financial period after 2027,” Zahradník told Novinky. According to him, it will be so on the assumption that the future rules of the game will not be significantly different from the existing ones, and the decisive criterion for the allocation of the cohesion policy will be the value of GDP per inhabitant.

A change could be brought about, for example, by some significant enlargement of the EU, which would reduce the average value of GDP per inhabitant, which would make the Czech Republic statistically richer. “In the event that the EU expands to include, for example, Montenegro, or even Albania, nothing fundamental will change; if there were more of those countries and among them, for example, Ukraine, we would of course become net payers. But this scenario is almost certainly unrealizable for the next decade, for example,” concluded Zahradník.

In the current programming period 2021–2027, the Czech Republic will therefore remain a net recipient, and it will be the same in the next seven-year period.

In the summer of 2020, Deloitte estimated that the Czech gross domestic product could reach the EU average in 2030. However, this will most likely not happen. “Currently, it seems to us that we will not catch up with the EU average by 2030. Today, our GDP per capita, calculated according to purchasing power parity, is 90 percent of the EU average and will probably not increase much by the end of the decade. As a result of the energy crisis and other factors, we stopped converging to the EU average,” says Deloitte analyst Václav Franče.

In the last twenty years, subsidies from the EU have helped the development of thousands of Czech municipalities, institutions and companies. However, they do not always have a beneficial effect on the market. “Although from the Czech point of view, the balance sheet of the European system of subsidies represents a net inflow of financial resources, it distorts the motivation of economic entities, which subsequently often focus on satisfying the conditions of subsidy projects rather than their customers, which leads to an unnecessary waste of precious resources,” pointed out the economist of Cyrrus Vít He fenced.