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09/12/2016

EU may offer Britain installment plan for disputed bill

UK & Europe

EU may offer Britain installment plan for disputed bill

David Cameron and Jean-Claude Juncker. Brussels, July 2014. [European Commission]

EU finance ministers are likely to let Britain pay a hefty new bill to Brussels in interest-free installments, but rule out any reduction in the surcharge, triggered by historic revisions to national income data, officials said on Wednesday (5 November).

The row over the €2.1 billion demand for payment with little more than a month’s notice has put British Prime Minister David Cameron under pressure from Eurosceptics at home, in the run-up to a national election in May.

It has also further strained relations between Britain and the EU ahead of a possible referendum on Britain’s membership in 2017 if Cameron wins the election.

Cameron, who lambasted EU technocrats over the issue at a summit in Brussels two weeks ago, has found sympathy from Italy, Germany and France because of what one official described as “the unprecedented result” of the statistical review.

But new European Commission President Jean-Claude Juncker, whose appointment Britain tried to block, told the European Parliament on Tuesday (4 November) that he did not like Cameron’s vivid display of anger over the budget bill at the end of the summit.

On Wednesday, Juncker told a news conference Cameron’s tactics were putting London at a disadvantage. “I don’t have a problem with David Cameron,” Juncker said. “He has a problem with the other prime ministers.”

Officials believe a compromise is possible by granting Britain permission to pay in installments monthly, quarterly or at some other rate over the coming months. London would avoid the interest charges that would accrue daily from 1 December, at an initial annual rate of 2.5%, if it failed to pay in full.

EU finance ministers, including British Chancellor George Osborne, must find a solution at a meeting on Friday in Brussels, where they are expected to vote to change the regulation that sets down how budget payments are made.

“The solution is likely to be installments, but Britain will still have to pay because it signed up to the statistical review back in 2000,” said one EU official, speaking on condition of anonymity.

Weighty Backing?

Cameron told parliament last week that he would not pay “anything like” the sum demanded, and that he would not meet the 1 December deadline.

Under a system of installments, the deadline for the first payment could also be pushed back to January, but that is still open to negotiation and must also be agreed by the European Parliament, officials said.

France, Italy and Germany are open to agreeing the change, diplomats say, giving Britain a good chance of getting the regulation adjusted because EU votes are based on a majority.

However, officials said the decision would not be a concession to Britain but rather a mechanism to allow budget payments in installments for every one of the EU’s 28 countries any time a statistical review triggered an exceptional charge.

Another official said installments were possible this time, because the European Commission, the EU executive that handles the budget, had no cashflow problems at present because of several large anti-trust fines paid to the EU by companies.

David Gauke, the British minister with responsibility for the EU budget, said on Tuesday that the deadline for payment was not “fair or reasonable” and that Britain should not be punished for wanting extra time to scrutinise the details of the charge.

EU officials argued the revision, which also resulted in Italy, the Netherlands and even indebted Greece being asked to pay much more for their share of EU costs, was part of an annual statistical exercise handled by civil servants, not politicians.

The size of the revisions was unusually large, as national income was adjusted going back a decade or more. Germany and France were big beneficiaries – so much so that Paris was able to make a significant reduction in its expected 2015 budget deficit.

The European Commission has been at pains to note that it will not benefit from additional funds – the revision exercise simply passes cash from some member states to others.