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, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 135.

    @125.D Bumstead
    So the testimony of someone writing about manufacturing decline "viewed through the Lens of the Birmingham Small Arms Company Ltd" in enough to let Thatcher off the hook for all the destruction she caused, is it? Not entirely convinced.

  • rate this
    0

    Comment number 134.

    Call-me-Dave and the far right would be delighted if this all fell apart; in fact more so than if there were a compromise. This is because they can appeal to the strong, populist xenophobic streak in older British voters of both left and right, and get the tories re-elected on a get-out-of-Europe ticket. (Oh, never mind the aftermath...!)

  • rate this
    0

    Comment number 133.

    What is sure is that one should NOT be paying in more money than one gets out. But on this last point, how does one calculate the amounts ? If the media simplified the data and the issues, it would be simpler for the man or woman in the street to have a more balanced view on the question.

  • rate this
    0

    Comment number 132.

    Unfortunately this is one domain where it's difficult to disover all the advantages and disadvantages and weigh one against the other. What is sure is that EU bureaucrats are paid too much and have too many fiscal advantages over ordinary people. What is sure is that the CAP is a waste of public money and farms should be bigger and more rationalised to keep costs down.

  • rate this
    -1

    Comment number 131.

    @130. David Horton
    Of course places like Poland joined because they would get something from the EU (be stupid to join otherwise.) Country's like Germany let them join because it's several milling more customers for GER goods, more raw resources and labour. The UK wanted them to join because wince the 80's we've preferred a broader EU to a deeper one. More countrys = less chance of a Fed Europe.

  • rate this
    +1

    Comment number 130.

    Why is it that our 'colleague' nations in the EU are painting us as the villains?

    Half the countries (including the uninspiring, van Rompuy) also want cuts or freezes. France, Italy and Spain won't negotiate the CAP, the A8 countries want much more money to build their roads & railways.

    This is ridiculous.
    What about OUR farmers, OUR roads, OUR networks?

    Get us out of this beggars club now.

  • rate this
    +2

    Comment number 129.

    Of course Poland and other similar countries wish to see an increase in the budget, It's not their money they're spending!

    I see no sense in Countries like Poland, who clearly get alot more out of the EU than they contribute, having as much leverage at the table as those who pay in the billions they like to spend.

  • rate this
    -1

    Comment number 128.

    118.Tim0thy

    108.EUprisoner209456731
    i just love all these %ages you glibly toss about. 80% want this, 70% want that. Have you any proof of these assertions other than UKIP statements?

    EUp: I did not get this information from UKIP. At the time of the arrogant imposition of the Lisbon Treaty there were many opinion polls including on this site.

    If you didn't notice them, then ...

  • rate this
    0

    Comment number 127.

    122.David Horton

    Sadly, EUphobes are amateurs when it comes to the BIG LIE

    EUp: We don't need to lie to make our case. "EU"-lovers do. We are only in the "EU" because of the nauseating, manipulative benaviour of "EU"-lovers.

    We should be just as "cheeky" as "EU"-lovers but not dishonest like them.

    I note that there is now a German "Open Europe."

    They need a UKIP too!

  • rate this
    0

    Comment number 126.

    @123 Mags
    Never said that there were no advantages but it's not possible for a UK PM to point at the EU and show a demonstrable sound-bite sized advantage to the electorate. The GER voter can see it in his own life and work. Paris would be full of farmers burning sheep if the CAP went. The only sacred thing the Brits have about Europe is the rebate.

  • rate this
    0

    Comment number 125.

    @123 It wasn't Thatcher who destroyed the UK's industrial base. It was pretty much decimated before she came PM. I suggest you read "An Examination of The Post-Second World War Relative Decline of UK Manufacturing 1945-1975 Viewed through the Lens of the Birmingham Small Arms Company Ltd" by Joe Heaton for starters. You can find it on the net as Heaton07PhD.pdf- and there are other publications.

  • rate this
    -1

    Comment number 124.

    David Horton @122

    Millions have died in 'famines', with food hoarded not far away

    Employment 'cannot be afforded' to millions, 'our' money hoarded

    Trying to 'raise the tone' of members, the EU attracts scapegoaters

    "We need to get out", a sweeping 'representation' of 'broken Britain'

    The truth is our shared future needs democracy, Equal Partnership

    Divided we fall; and the bigger the harder

  • rate this
    -1

    Comment number 123.

    120 springheel

    "and Britain was unusual in not being able to point at the EU and show a compelling national interest"

    Have you compared our export figures pre-and post 1973?

    And if Mrs Thatcher hadn't destroyed our industrial base to switch us to an unsustainable service and financial industry, we wouldn't have a trade deficit. A nation of 60m people needs to produce things to sell

  • rate this
    +2

    Comment number 122.

    21.margaret howard
    it is a technique known as the BIG LIE
    --
    Sadly, EUphobes are amateurs when it comes to the BIG LIE

    BIG LIEs are:

    3 million British jobs would be lost if we left the EU
    The EU wouldn't trade with us
    The EU would hit us with crippling trade tariffs


    The truth is clear to everyone
    The EU wants our money and for us to shut up and not argue.

    We need to get out.

  • rate this
    0

    Comment number 121.

    99 Timothy

    "it is a technique known as the BIG LIE. Perfected by Karl Rove it basically says never tell a small lie always tell big lies then ignore all complaints. Sound familiar?"

    UKIP mantra? I've googled it and many other rather shady characters like Stalin and Goebbels are quoted as being the originators. Very fitting!

  • rate this
    +2

    Comment number 120.

    @115. The Leveller

    You are seeing this wrong. It's not that Britain is being "difficult" it's that the others are not asking why, when national budgets are being cut, the EU budget should increase. Traditionally the EU gave GER a bigger market for their goods, FR got the CAP and Britain was unusual in not being able to point at the EU and show a compelling national interest = harder sell @ home.

  • rate this
    +1

    Comment number 119.

    I hope David Cameron will stick to his guns and not cave in to demands for more money for Brusscow. It's high time that the EC and EP realize that one cannot demand budgetary discipline from member states and at the same time show a total disregard for such discipline themselves.

  • rate this
    -1

    Comment number 118.

    108.EUprisoner209456731
    i just love all these %ages you glibly toss about. 80% want this, 70% want that. Have you any proof of these assertions other than UKIP statements?
    How about 90% don't really care because they are too busy trying to survive in the modern world created by the banksters

  • rate this
    +1

    Comment number 117.

     
    HAPPY THANKSGIVING!

    to our U.S. contributors.

    God Bless America!

  • rate this
    +1

    Comment number 116.

    Le Figaro reporting "major concessions from France on the CAP" the natives are not happy :)

 

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