European Union Makes Surprise Deal on Budget

BRUSSELS — The European Union may soon have a new budget — including the first cut to spending in its history — after a surprise breakthrough deal on Thursday.

The European Commission president, José Manuel Barroso, announced agreement on a seven-year, 960 billion euro, or $1.27 trillion, budget after early morning talks with the president of the European Parliament and other officials from E.U. member states.

Mr. Barroso said the deal included more flexibility than earlier versions.

The budget still needs final approval by the European Parliament, but that is looking more likely thanks to this agreement. The European Parliament president, Martin Schulz, called the deal “acceptable” and said he was optimistic that he would have a majority of Parliament members backing it at a vote next week.

The budget includes the first cut to spending in European Union history at a time when many of the bloc’s countries are in recession and struggling to reduce their national debt. The budget sets what the bloc of nations can spend on programs ranging from infrastructure and farming to development aid and employment measures.

The 27 European Union countries have been trying since last autumn to cobble together a budget for the years 2014-2020. The talks were difficult because some countries wanted to increase or maintain spending levels while others insisted it made no sense to increase the budget while individual governments were imposing tough austerity policies.

E.U. leaders agreed to an overall package in February, but the European Parliament asked for more spending and more say in the way the budget would be handled.

Ireland’s prime minister, Enda Kenny, championed the latest agreement. Ireland had been hoping to crown its six-month presidency of the European Union, which ends Sunday, with a comprehensive budget agreement.

“I think it is very significant,” Mr. Kenny told reporters in Brussels alongside Mr. Barroso and Mr. Schulz. Noting that there was “a lot of doubt” at the beginning of the year “about whether compromise could be negotiated” between the E.U. member states and Parliament, he added, “We have now succeeded in doing that.”

Separate from national spending, the budget is designed in part to balance out the economic development of its members by giving funding to poorer countries. The European Union has funded thousands of infrastructure and capital projects over the years, from the installation of broadband networks to the upgrade of road networks.

The budget also includes items meant to generate economic growth, like research and development and a new, more accurate satellite navigation system. It also funds regulation and administration in such areas as mergers and competition, the review of national budgets to ensure they do not include excessive deficits, and banking supervision.

If the European Union fails to get a seven-year deal passed by Parliament before the end of the year, the bloc would have to revert to annual budgets, which would make long-term planning difficult.

Article source: http://www.nytimes.com/2013/06/28/business/global/european-union-makes-surprise-deal-on-budget.html?partner=rss&emc=rss