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 75.

    Some parasites worked out that if they created a system where they could collect funds from member states they'd have jobs-for-life if they were the ones determining where this money goes. This last year they cannot account for 4% of that communal budget. Where has that money gone? Until we get to the bottom of what might be THEFT on a massive scale, no British money should go to Brussells at all.

  • rate this

    Comment number 74.

    Sums up the EU project. And this is only the funny side.

    We need to get back to Maastricht with a maintenance crew only. We have been cheated by Nice and Lisbon out of our democracy. The U.K. needs to stand up and say the obvious - no more. Back to a single market for products, services, capital and people only.

  • rate this

    Comment number 73.

    Lots of hot air from lots of self interested parties. Cam the Sham has to play to the rabid right wing audience back home else the Daily Heil et al will be most irate.

    Cam's new catch phrase should be '...Yes I can, if the banks say it's OK...'

  • rate this

    Comment number 72.

    I think deep down EU knows that it will be harder to be a Super State without Britain
    which is almost like a roadblock of sorts

    Britain is the only thing thats holding EU back from taking over all of Europe (to bring 'peace' of course)

    By the way,
    Happy Thanksgiving, everyone!!! ;)

  • rate this

    Comment number 71.

    I stand corrected. Apparently that was blocked because it was French and not English (or Welsh or Gaelic).

    Seems the BBC, as a matter of policy, also thinks the world should speak only English.

    Time for a putsch? (see how I avoided the obvious French term? Clever hein?)

  • rate this

    Comment number 70.

    The question of what "we" get out of the EU rather depends on who "we" are.

    If "we" are party members, the EU is an unqualified boon. If we are anyone else, it is a tax to support the grand schemes of unelected party members.

    Political parties grow in power by winning elections, or by expanding the size of the state.

    The EU, like the USSR, is based on the premis that the party serves you.

  • rate this

    Comment number 69.

    For the benefit of the moderators, you should probably be removing post 63, rather than 65. That was the rude one.

    Other than that, keep up the good work! I think you're proving my point wonderfully.

    BTW, there are online translation services that can help you spot an insult ;-)

  • Comment number 68.

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

  • rate this

    Comment number 67.

    There you have it. The results of a social experiment are in.

    French is the most common second language amongst Brits but nevertheless it's quite adequate to bypass BBC censorship (so far).

    The average Brit needs to learn the right skills to get on in the world. This is not about competitiveness, it's about combating ignorance and overcoming differences.

  • rate this

    Comment number 66.

    Cameron just shouldn't be at this meeting, because we just shouldn't be in the "EU".

    "What is surprising is that the UKIP vote was three times as large – three times as large – as that of the Liberal Democrats"

  • Comment number 65.

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

  • rate this

    Comment number 64.

    So Eurocrats can expect 16% of their salary for life if they leavr their jobs. Stopping this would save 1.4 billion over 7 years.
    I suggest this is a good place to start

  • Comment number 63.

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

  • rate this

    Comment number 62.

    This is a great distraction from more important and urgent problems.

    Well done Barroso, vR, DC and all the PMs and presidents. For a few days, we're all going to ignore the real catastrophes that you're allowing to happen or to stupid to stop.

  • rate this

    Comment number 61.

    The Spanish/ Italians are aghast they might have to be net contributors.
    These are the same people who want net contributors to contribute more,
    it would be laughable if they weren't using us as a scapegoat, despite us subsididing them for 40 years.

  • Comment number 60.

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

  • rate this

    Comment number 59.

    For 2yrs I’ve been living in a country where some of the 309.5bl Cohesion will go and I am appalled by the lack of monitoring on EU funding. Politicians are weekly exposed of corruption, particularly on tenders for EU funded infrastructure projects. It’s morally repugnant and needs to be questioned before honest hardworking families across the EU delve deeper into their pockets.

  • rate this

    Comment number 58.

    "Pull out"

    Do we really want a divided potentially warring Europe on our doorstep?

    EU paperd over cracks, giving us a little time to prevent WWIII

    Urgent need is for UK to lead, for genuine informed mature democracy

    We've a strong history of desire, admittedly dulled under Murdoch

    But necessity drives speech, by Providence

    First David Jenkins, then Rowan Williams, now Justin Welby

  • rate this

    Comment number 57.

    " competition with Mandarin in a few decades anyway."
    Mandarin is written in pictograms, it does not have many speakers outside China. Even inside China it has mutually unintelligible dialects and by no means everyone speaks it at all

    Please answer the question - would the EU function much better and be more likely to survive if everyone in it spoke the same language ?

  • rate this

    Comment number 56.

    @53. ComradeOgilvy
    Which single foreign language... spanish, french, german, italian, dutch.... (not to mention which dialect). The simple fact is that every german engineer, every italian engineer, every dutch engineer needs to learn 1 single foreign language, we need to learn at least 7 or 8 to be nearly as mobile.


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