The EU budget marathon


Countries approach the budget negotiations from different directions, Gavin Hewitt explains.

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Nothing focuses leaders' minds like money and budgets. The voters may not be able to follow much of the EU's business but they usually can follow what funding goes to Brussels.

However when it comes to the EU, nothing is quite what it seems. Riddles and enigmas are all wrapped together. It is enough to say that all countries do not begin from the same starting point when they assess the budget, nor do they use the same criteria.

To add to the complexity there are different ceilings for payments and for commitments. In such a world it may be difficult to judge whether leaders have got what they promised. Such is the EU budget!

The day will begin with 15-minute interviews. The leaders - beginning interestingly with David Cameron - will one by one go and see the President of the Council, Herman Van Rompuy, and the President of the Commission, Jose Manuel Barroso. Prime Minister Cameron promised that he would be "negotiating very hard for a good deal for British taxpayers and European taxpayers".

At this meeting the leaders will lay out their negotiating positions. Only in the evening will they get together and the open haggling will begin. Herman Van Rompuy hopes the interviews will provide him with the information to forge a compromise.

On the surface an agreement looks difficult. A brace of Eastern and Central European countries - particularly Poland - want the budget to increase. Many other countries, including Britain, Germany, Sweden and the Netherlands, want it reined in. That is the fundamental fault line.

The Commission had initially set out a budget costing over a trillion euros, which would have been a 5% increase. A second proposal was put on the table by Herman Van Rompuy.

That amounted to 80bn euros less. Using 2011 prices, it would cap payments made during the seven-year period at 940bn euros. That proposal has become the focus of the negotiations.

British pressure

The British see it as a useful starting point but insist Mr Van Rompuy "must go further". Depending on the method of calculation, the Van Rompuy proposal could be interpreted as a small cut in the ceilings as compared to the previous budget, but for Britain there are two problems.

Firstly it would require the UK to make a concession on its rebate, which is worth around £3bn a year.

That, according to British officials, is non-negotiable. Since it was won by Margaret Thatcher in 1984 it has acquired totemic status. Without it the British contribution would almost match that of Germany. Other countries, particularly the French, have the British rebate in their sights.

The other problem is that the British judge the budget on what is spent, what the UK Treasury actually pays to the EU.

Quite deliberately, Downing Street has not provided its target figure in the negotiations. It wants some room for manoeuvre, but my understanding is that their target remains significantly below that of Herman Van Rompuy - somewhere just under 900bn euros, compared to 940bn.

Even if Mr Van Rompuy were to satisfy the British, it would only deepen his problems elsewhere.

Poland and Spain are just two nations insisting that more funds should be spent on economic development in order to close the gap between the richer and the poorer countries. The Spanish and Italians say they are at risk of becoming net contributors and have said that is "unacceptable".

The French have threatened to use their veto if farming subsidies are reduced. Some other countries like Denmark are fighting for a rebate of their own. So every step towards the British position creates problems elsewhere.

Domestic politics

The Germans are not far from the Van Rompuy proposal and are prepared to compromise. They are protective of their neighbour Poland and do not want to see an important ally losing out.

But, like the British, they want to see a cut in administrative costs and want to see the budget rebalanced towards projects that enhance growth and innovation, with less money for farm subsidies.

If a deal is done by Friday, when the summit is due to end, it will be a major achievement. The expectation is for the meeting to run into Saturday or to collapse. German Chancellor Angela Merkel has already spoken of having to return at the beginning of next year if no deal is done this week.

Britain does not want to be blamed for failure. Downing Street - unlike when the British veto was used in December - has been making the calls and trying to find allies. There are countries which would be happy to see the UK painted as the fall guy once more.

Britain feels strongly about the budget but has a much more important fight coming up. That is over banking union. That will directly impact on the City of London. David Cameron will not want to waste goodwill on the budget when he will need every bit of support he can gather to protect the UK's financial sector.

Even so, his ability to compromise will be limited by his backbenchers, who see the budget as an opportunity to draw a line in the sand over EU spending.

It should be remembered that if no deal is reached, then the 2013 budget will be rolled over with a 2% increase in inflation. In that event decisions are taken by qualified majority voting and Britain would have less influence.

Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 55.

    What about the single market???

    If someone told you to invest in Lehman Bros in 2008 would you just do it?
    Back a winning horse and set up a free trade agreement with the G8 / G20 instead.

  • rate this

    Comment number 54.

    We don't share the same currency
    We are a net contributor
    We trade globally and are pushing to BRIC markets etc

    What are the benefits? Pull out, Pull out now!

  • Comment number 53.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 52.

    "approxiately 370m native English speakers"

    Disingenuous. According to this piece, there are 1.75 billion people who can speak English 'at a useful level'.

    There are more English speakers in China than in India, in fact I heard on a BBC radio program some time ago there are more English speakers in China than in the USA.

  • rate this

    Comment number 51.

    "This comment has been referred for further consideration. Explain."

    Before it got removed, it was also scoring quite a few negatives.

    Curiously, I was stating support for diversity, opposing the idea that others should change to be more like us.

    For reference, a century ago German was THE technical language. Anyone recall the original "lingua franca"?

  • rate this

    Comment number 50.

    There are now Italian universities offering courses taught in English.

    If the EU had a common language, it would work much, much better. Its prospects would change out of all recognition.

    Do you think the French or Germans would agree to English as that language, since they are so pro-EU ?

    Do you have another candidate language ?

  • rate this

    Comment number 49.

    Eurozone business set for grim quarter
    Bloc faces biggest quarterly contraction since 2009

    German doubts force rethink on Greece

    Greek leaders round on aid delay

    God bless the EU......

  • rate this

    Comment number 48.


    "Grow up!"

    There are approxiately 370m native English speakers in the world. A little over 5%

    Anyone who expects the rest of the world to conform to that needs to grow up themselves. Or at least move into the 20th century.

  • rate this

    Comment number 47.

    Chris L@44
    Spoiled by greedy evasions of principle

    Broken societies blaming trade-not-war club?
    For its aggregate broken-ness & its Lucky-Dip!

    In blind acceptance of citizen inequality, we accept the status at best of children, at worst of slaves, all ruled by Fear and Greed, democracy made a sham, the future given to break-neck profit, to peril of People & Planet, the triumph of Mammon

  • rate this

    Comment number 46.

    "For better of worse" the Empire is gone."
    It doesn't take long before someone has to bring the Empire up to try and prove their point as if it's going to carry some Kudos or weight. Grow up!

  • Comment number 45.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 44.

    What we are seeing here is the reason why there won't be a single body running the EU in the near future. Every side is looking to protect its own. Poland and the other newer members want their go at the trough while France wants it share protected. Even Germany is now having second thoughts, all be it driven by the 2013 elections. The UK is no longer stands alone. Not what Van Rompuy had in mind

  • rate this

    Comment number 43.

    @36. DynamicEntrance
    No its not the fault of the EU that the UK has been stupid. But it is not an excuse to keep drinking the bleach.
    The language issue is a real problem. English (for better or worse) is THE international language - all technical people and many more learn English. In many international companies English is the office language. Yet companies still insist we learn local as well

  • rate this

    Comment number 42.

    Should the question be "bang for the buck" i.e. quality of the projects, or should it be blind, thoughtless cut, cut, cut.
    I believe this is the BIG mistake of the British position of cut, cut, cut. Where is the money going now? Is there definite return on the money?
    What does Britain intend to do with its cut, cut, cut?

  • rate this

    Comment number 41.

    "...we contribute taxpayer money for a benefit..."

    The benefit being what ?

    If you mean trade, we could contribute to belong to the EEA; belong to the single market and avoid all the other crap.

    Personally, I doubt it's worth the money to belong to the EEA. I think we would find trade with EU countries whether we were in or out.

  • rate this

    Comment number 40.


    Have you noticed that we pay for a lot more than soldiers now? High earners will still be getting less back... in purely monetary terms.

    "EC employees pay 10% tax"

    Can you provide a reference please?


    That wouldn't be trade. That would only happen through a form of coersion. I don't know of many UK exporters in that position. Do you?

  • rate this

    Comment number 39.

    "less CAP"

    As @33, focus on the citizen

    CAP secures votes in countries that otherwise 'could not afford' the survival of 'ordinary farmers', not alongside 'traders in our future', those enriched by 'entitlement' to perverse City incentives

    Given citizen equality, all would share interest in intelligent investment, in 'lower profit' food and culture, as well as 'profitable' car-making

  • rate this

    Comment number 38.

    "Le Figaro sees it differently"

    Spiegel says the exact same thing as Le Figaro - using almost exactly the same words.

    I think it's probably a briefing coming from Van Rompuy's people. He proposed the 940 and it would make him look good.

  • rate this

    Comment number 37.

    @27. ComradeOgilvy and 29 d_m
    Exports are beneficial ONLY when we make a profit from doing it. Sure you could sell me your house for a tenner and end up a tenner better off, but when getting hold of the house to sell me costs 100,000 you are not better off. Even if it makes me richer and I come and give you 20 for your car.

  • rate this

    Comment number 36.


    If a man who refused to learn to read drinks from a bleach bottle labelled so is it the fault of the company?

    All these things you list are not faults with Europe but problems of your own making.


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