April 2, 2023

Wrangling Over Europe’s Budget Gets Under Way

BRUSSELS — The hotly anticipated battle over the next long-term European Union budget began Tuesday when the European Commission snubbed a suggested cut of at least €50 billion.

The commission’s terse rejection of the proposal made by Cyprus, which currently holds the rotating E.U. presidency, was yet another sign that the hostilities are likely to be protracted as countries including Britain and Sweden call for even deeper cuts.

David Cameron, the British prime minister, has requested a freeze in payments to the Union to keep them at 2011 levels, and he is under pressure from members of his Conservative Party to push for cuts compared with 2011 levels. He has also threatened to veto any budget deal at a summit meeting in November if Britain does not get its way.

“The politics of the E.U. budget are always nasty, but they may be nastier this time partly because of Mr. Cameron trying to be Mrs. Thatcher,” said Stephen Tindale, an associate fellow at the Center for European Reform, a research organization in London.

Margaret Thatcher, the former British prime minister, earned lasting admiration from Mr. Cameron’s party by taking a firm stance in E.U. budget negotiations during the early 1980s and by winning a rebate that still makes up much of the gap between Britain’s share of contributions and receipts.

The E.U. budget is negotiated every seven years and has long been a polarizing issue as each country seeks to get the most from the process. The spending plan amounts to about 1 percent of economic output in the 27-member Union and is used to finance a huge range of policies, including decommissioning power stations, building roads and subsidizing farmers.

But striking a middle ground is expected to be particularly hard this year amid the climate of austerity brought on by the financial crisis.

“It’s like an exercise aimed at squaring the circle,” said an E.U. official who spoke on condition of anonymity because he was directly involved in negotiations. “Nothing is agreed until everything is agreed.”

The commission, the E.U.’s executive body, proposed in June 2011 an upper limit of €1.03 trillion, or $1.33 trillion, in spending for 2014 and 2020, an increase of about 5 percent over the previous seven-year period.

Olivier Bailly, a spokesman for the commission, said at a news conference Tuesday that its proposal “strikes the right responsible balance in times of crisis” and would be “a tool for investment in growth and jobs.”

Under the commission’s proposals, farm spending would still account for about 36 percent of the budget. Funds for projects like roads, railways and supporting small businesses that mainly go to countries more recently admitted to the Union would account for slightly less. Around 6 percent would be for E.U. administration.

Germany is part of a group called the Friends of Better Spending, which includes the Netherlands and Finland, that is focused on improving the effectiveness of spending while capping its growth. But Britain and Sweden have been the most outspoken on the need to rein in spending.

“No deal will be possible on the basis of cuts of only €50 billion,” Birgitta Ohlsson, the Swedish minister for E.U. affairs, said in a statement Tuesday, after the Cypriot proposal. “It is unacceptable that the common agriculture policy is protected from cuts.”

She said Sweden was seeking €150 billion in cuts.

Ms. Ohlsson also criticized the Cypriots for making the largest cuts where the “E.U. needs to invest — in research, foreign policy and cross-border infrastructure.”

The Cypriot proposal is still €54 billion above the baseline set by Mr. Cameron, and would represent 6.1 percent growth compared with the levels of payments in 2011, according to Open Europe, a research group based in London.

The jousting that got under way this week will set the scene for a meeting on Nov. 22, when the Union’s leaders are supposed to finalize a deal setting out spending until the end of the decade.

Herman Van Rompuy, the president of the European Council, a body representing E.U. leaders, has warned that the talks could last three days, but officials fear the haggling could go on longer.

Even then, the European Parliament would still need to agree on the final amount.

This article has been revised to reflect the following correction:

Correction: October 30, 2012

An earlier version of this article misstated the upper limit of spending proposed by the European Commission for 2014 and 2020. It is $1.33 trillion, not $133 trillion.


Article source: http://www.nytimes.com/2012/10/31/business/global/wrangling-over-europes-budget-gets-under-way.html?partner=rss&emc=rss