Budget battle boon to Van Rompuy

Negotiations over the Multi-annual Financial Framework (MFF) for 2014-2020 are likely to spread until at least October next year, paving the way for the full-time president of the European Council to preside the talks and for Herman Van Rompuy to be reconfirmed in his role at the end of his first mandate, next May.

The timing in the fraught MFF negotiation would also pave the way for Van Rompuy to seek renewal of his term as president – which expires mid-way through next year – as a broker representing the interests of smaller member states in the budget talks, some EU sources said.

A conference organised by the Polish presidency, the European Parliament and the Commission in Brussels last week (20 and 21 October) heard broad stakeholder support for the Commission’s MFF proposal of €1 trillion for the period 2014-2020 .

MFF is always a tough nut to crack

However, there were also clear indications that the negotiations over the next EU budget will be protracted and difficult, and will probably lead well into next autumn.

The objective of the event was to enable national parliaments to engage in a debate with EU institutions over the next MFF.

Polish Prime Minister Donald Tusk told the conference that there was scope for at least two more conferences to be staged, one in six months, and another next autumn indicating that agreement will not have been reached by then.

Budget Commissioner Janusz Lewandowski told delegates that difficult issues remained for negotiation, such as the Commission’s proposed financial transaction tax, opposed by the UK.

One European minister told EURACTIV that the scope for an early agreement next year was very limited. He said that there was ‘no chance’ of an agreement before the conclusion of French presidential and legislative elections – scheduled for May 2012.

It is more likely that the horse-trading will flow at least into the autumn, he said.

A source close to the Council said: “We are expecting that Van Rompuy will start to get busy on mediating the MFF next autumn. It will be the first time that the European Council will have impartial chairmanship during the complicated budget deal.”

Van Rompuy rolling up his sleeves

Delayed budget negotiations are likely to boost the re-appointment chances of President of the European Council Herman Van Rompuy, whose term expires at the end of May 2012.

At the time when Van Rompuy’s term expires, as the European Council moves from the presidency of one smaller member state (Denmark) to an even smaller one (Cyprus), Van Rompuy will be able to tout for re-appointment on the basis of being an honest broker for the smaller member states, since he himself is from Belgium, in advance of taking over as the mediator in the negotiations.

This would be the first time that a non-member state-led Council president would preside over the budget negotiations – the last MFF negotiation was chaired in the European Council by the UK-presidency under former prime minister Tony Blair.

“Now we are mainly discussing austerity and the the situation is grave and there will be voices saying reduce the budget,” said Polish Prime Minister Donald Tusk.

“I hear those voices but that does not mean I accept them, but we have to listen because we need to think at this time before spending one penny of public money. I support the budget proposal of the Commission but if we are not able to prove the case for it we will lose the battle with egoism and then the main source of our common strength – solidarity – will diminish,” Tusk warned.

“We need to consider those countries which are making a net transfer of about 4% to the EU, what will matter ultimately is the envelope of cohesion, because now there is a 60:40 split in favour of the new member states,” according to Commissioner Janusz Lewandowski.

He added: “Our proposal on the financial transactions tax is merely 0.1% of the value of transactions. Currently the UK charges a stamp duty on share transfers of 0.5%. I understand that they have a different point of view about this but we need to be honest and acknowledge that there is a dispute here before negotiating.”

“There needs to be emphasis on growth for small business, and cutting back on regulation,” UK MP Bill Cash said, adding: “Is it surprising that there are riots going on when they are talking about spending money but they are not talking about finding the ways to enable small businesses to earn it.”

The size, structure and priorities of the EU's annual spending, which amounted to roughly €130 billion in 2010, are governed by the 'Financial Perspectives', which cover the period 2007-2013.

Negotiations over the EU's next multi-annual budget were launched in June, with the European Commission proposing to allocate €1 trillion for the period 2014-2020.

In a bid to reduce contributions that come directly from national coffers, the Commission suggested levying new taxes directly, a proposal that was strongly rejected by the UK, which labelled it "unrealistic".

The EU tax could take several forms: a tax on air transport or a share of new financial, corporate or energy taxes, as well as an EU VAT.

  • 26 October 2011 Parliament to debate EU budget in Strasbourg
  • October 2012 Negotiations over the Multi-Annual Financial Framework likely to be passed over to the mediation at the European Council

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