Pedro da Costa: Hi, I'm Pedro da Costa, Editorial Fellow here at the Peterson Institute for International Economics. I'm joined by Simeon Djankov, who's a Senior Fellow here and former Finance Minister of Bulgaria. Thank you so much for taking the time.
Simeon Djankov: Thanks for having me.
Pedro da Costa: So I wanted to talk to you about EU's recent decision to change its funding structure a bit if that's one way to put it where they've seemed to have redirected funds that were previously allocated for Eastern European countries. And they have directed that toward migration spending. Could you talk a little bit about what's behind that decision?
Simeon Djankov: Certainly. There is a big pressure on the budget of the European Union to reallocate resources or to find new resources for the immigration crisis that has engulfed the European Union over the last two or three years. There's no new funding. In fact, overall funding for next year is reduced by about 7 percent. So it needs to be fund within the budget.
And hence, the weaker countries of the European Union, the new entrance if you like, Eastern Europeans, were thought to be the countries where utilizing EU fund is less successful, not as fast. And, therefore, some of the significant part of their funding for next year 2017, about a quarter in fact, were shifted from their own budget, so to speak, to overall immigration border control issues.
Pedro da Costa: Now, is this a policy that you see as sound in the long run or is it something that could have repercussions for kind of East-West relations? I mean, of course, there's a migration crisis that does require funding. But is that the right place to get the money?
Simeon Djankov: The new crisis unquestionably requires funding. But taking it from not just Eastern Europe but also the poorer part of Europe endangers the main premise of the European Union, which is that there somehow has to be gradual evening of the incomes basically equality across the whole Union.
Pedro da Costa: The Great Convergence that—
Simeon Djankov: Convergence. Exactly. In fact, if you take money from the East rather than the West, you are creating divergence rather than convergence. The official argument is that many of the East European countries have not used their money as efficiently. But you know they're new members. So I think that the choices should have been more broader-based than say some of the Southern European countries and some of the Northern European countries also have seen their budgets cut.
Pedro da Costa: Now, how much does politics play into this? Because, of course, with the very rapid rise of immigration into Europe, there's been anti-immigrant sentiment in many countries, but it's perhaps even more pronounced in some places like Eastern Europe, if anything, because they're closer to the action. And that's sort of the entry points and particularly Hungary. Is this a little bit of retribution in that sense?
Simeon Djankov: I think there's certainly a scale of retribution for some of these East European countries who were perhaps the earliest together with the United Kingdom critics of the overall EU policy over the last year or year and a half. But it has not worked very well.
For example, the proposed quarter system for every European country will have a certain quarter of immigrants who moved there. Well, it didn't work. And East European countries were most vocal about it.
So I think there is a degree of retribution also because Greece has been getting a lot of money partly because the flows of immigrants have mostly gone through the Greek islands. But the neighboring countries including Bulgaria have not gotten any money actually so far. So it seems like it's one union, but still old members and new members are not on the same page.
Pedro da Costa: So, finally, well how do you see this developing from here on out? I mean the migration flow seemed to have moderated a bit with some of the tighter border controls, but they're still very large numbers. It's not a problem that's likely to go away because the wars from whence a lot of the migrants come are still going on. So is this a wedge that's going to continue to widen or how does one bridge that gap?
Simeon Djankov: Somehow, European Union needs to accommodate the demands for Eastern Europe for common border control, something that does not happen yet. Some of the countries in Eastern Europe spent enormous resources essentially to keep the European borders intact. Bulgaria is an example. And unless some money shifts that way but not just money, also overall joint border control, I think we're going to have very significant political repercussions.
And again, remember, several of the Central European countries already asked for the resignation of the president Juncker exactly over this issue at the beginning of the summer. I wouldn't be surprised if in another few months these resignation calls repeat if the current situation is maintained.
Pedro da Costa: Okay. Thank you so much for your time. I appreciate it.