Poland warns of ‘wars’ over EU long-term budget

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Poland warned cuts in the European Union's budget were not on the agenda of a summit of EU leaders on 16-17 December, during which the UK is expected to ask for a 25% reduction in the EU's long-term spending for 2014-2020.

Poland wants to avoid a repeat of the 29 October summit, when UK Prime Minister David Cameron abruptly introduced the issue of the 2011 budget, which was not on the leaders' agenda, a Polish official told a small group of Brussels journalists yesterday (30 November).

The next EU summit on 16-17 December is considered vital, as it is expected to reach agreement on a change to the Lisbon Treaty allowing for the establishment of a permanent mechanism to bail out countries in difficulty, such as Greece and Ireland.

Cameron stole the show at the October summit, backing Franco-German calls for a permanent crisis response mechanism and treaty change in return for keeping a lid on the EU 2011 budget.

Cameron also succeeded in obtaining a declaration that the EU's long-term budget will be moderate.

"Heads of state or government stressed that, at the same time as fiscal discipline is reinforced in the European Union, it is essential that the EU budget and the forthcoming [long-term budget] reflect the consolidation efforts being made by member states," the summit's conclusions state.

Now Cameron is reportedly seeking a 25% reduction in the EU's long-term budget to match cuts in spending made by his government at home.

Poland is in favour of a 'Community' approach to the long-term budget, meaning that it believes discussions should start after the Commission has tabled its proposals in June 2011. Otherwise the Commission would be taking orders from member states, the official said.

From 1 July 2011, Poland takes over the rotating EU presidency. The key players in the EU budget talks are Budget Commissioner Janusz Lewandowski and European Parliament President Jerzy Buzek, both of whom are Polish.

Sticking to the agenda

Even countries that are net contributors to the EU budget are unwilling to discuss the long-term budget issue at the December summit, EURACTIV understands. Leaders, including Germany's Angela Merkel, want to avoid discussions getting out of control at a time when the crisis in the euro zone is likely to dominate headlines.

At the summit, leaders are expected to agree on a permanent mechanism to deal with future crises in the euro zone by agreeing limited changes to the EU treaty. The change was requested by Merkel, who warned the current bailout plan for Greece and Ireland rests on shaky legal ground and risks being challenged before the German constitutional court.

Firstly, a discussion on the long-term budget would complicate an agreement on the permanent bailout mechanism, the Polish official explained. Secondly, the UK is likely to benefit from possible trade-offs on the budget issue in return for its backing for a permanent mechanism to assist countries in financial difficulty.

Indeed, as an eurozone outsider, London has nothing to lose on the small print of the permanent bailout plan.

Warsaw fearful of new eurozone entry conditions

But it is precisely that small print that Warsaw fears. Poland is worried that new eurozone rules will raise the bar higher for countries that wish to join the common currency, the official explained.

Poland is not yet a member of the euro zone, but its sound economy augurs well for its accession in the near future. The current problems of eurozone members Greece and Ireland have not discouraged Warsaw from its goal of joining the euro zone, the diplomat confirmed.

For example, Poland could be required to raise its corporate tax as a condition for joining the currency. Poland's corporate tax is currently at a relatively low rate of 19%, which makes the country highly attractive to foreign investors. In comparison, the corporate tax reaches 33.33% in France and 33.99% in Belgium. In Germany, the corporate tax is an aggregate of the federal tax of 15.825% plus a local tax ranging between 14.35 and 17.5%.

By introducing new legal conditions, the EU net payers would in fact set up a kind of eurozone "hardcore", effectively changing the Union's architecture, the diplomat said.

Warsaw's concerns are also a warning to "net contributors" and Germany in particular. Poland is to hold parliamentary elections next year, and any suggestion that the proposed treaty change could be against the country's interests could put its ratification in jeopardy, the diplomat explained.

Under its former President Lech Kaczy?ski, a Eurosceptic, Poland was one of the most difficult countries in ratifying the Lisbon Treaty.

The ramifications may be even wider. Should the "net contributors" push for big cuts in the EU's long-term budget, Poland may re-visit its positions on climate change, the diplomat said. 

"In Poland's perspective, the best use of EU money is under the structural funds. It will be difficult to explain to the Polish people that giving China money to tackle climate change is a better way to use EU money," the official said.

'EU running after events'

The Polish official complained that the EU had been unprepared to tackle developments in Greece and Ireland, and said the EU agenda was dictated by markets, not by EU leaders.

"We are running after events. We are not the master of EU summits. We are trying to catch the train while markets are dictating," he lamented.

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 (see EURACTIV LinksDossier).

Negotiations on the next multi-annual budget planning are due to start in earnest in 2011, and will cover the period 2014-2020.

The most controversial issue of the review is the current 44% (€55 billion) share of the budget that is set aside for agricultural subsidies.

On 19 October, the European Commission listed a number of options to fuel the EU's future budget, proposing that Europe decreases the share of spending coming directly from the member states.

To compensate for the shortfall, it proposed introducing an EU tax which 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.

More recently, European Commission President José Manuel Barroso offered to put on the table in June 2011 concrete proposals for "own resources" in the long-term EU budget.

  • 16-17 Dec.: EU summit, Brussels.

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