The EU's 'financial perspective' defines the framework for the Community's budget priorities over a period of several years. It describes over different budget headings the maximum amounts (ceilings) of commitment appropriations (financial commitments) for each year. It is not a fixed multi-annual budget per se. The annual budget procedure still determines the actual level of expenditure and the breakdown between the various budget headings.
There have been three financial perspectives up to now:
- the 1988-1992 financial perspective (Delors I package);
- the 1993-1999 financial perspective (Delors II package);
- the 2000-2006 financial perspective (Agenda 2000).
President Romano Prodi presented the Commission's Communication "A prosperous Europe: political timetable and budgetary resources for an enlarged EU, 2007-2013" to the plenary session of the European Parliament on 10 February 2004.
The Commission's proposal starts from three long-term political priorities:
- sustainable development: growth, cohesion and employment (the Lisbon agenda and sustainable growth);
- the interest of the citizens: freedom, security and justice;
- strengthening the Union's voice as a global partner.
In order to have the financial means to reach these political goals, the Commission is calling for an average spending level of 1.14 per cent over the seven-year period. Although the expenditure levels will increase in the first phase (due to enlargement), by the end of the period, in 2013, the budget needed would reach 143.1 billion euros. Over the whole period, the amounts needed will stay below the current financial ceiling of 1.24 per cent of GNI (gross national income).
Furthermore, the Commission has proposed re-arranging the structure of the current financial perspective into five budgetary headings:
- Heading 1: sustainable growth - including two sub-headings: 1a) competition for growth and employment; and 1b) cohesion for growth and employment;
- Heading 2: conservation and management of natural resources (including agriculture, fisheries and environment;
- Heading 3: citizenship, freedom, security and justice;
- Heading 4: the EU as a global partner;
- Heading 5: administration
In order to give "fair treatment for all Member States", the Commission proposed a generalised correction mechanism, which should "correct a budgetary burden deemed excessive in relation to a country's relative prosperity".
On the basis of the last compromise proposal presented by Luxemburg, EU leaders were close to a deal during the summit in June. But a stubborn position by the Netherlands (which had experienced a 'no vote' in its referendum on the constitution a few weeks earlier) and the UK's refusal to have its yearly rebate frozen and phased out later became the stumbling blocks of this dossier.
UK Prime Minister Blair insisted that his country would be unwilling to give up the rebate as long as the other countries oppose any further reform of the Common Agricultural Policy (CAP). The British argue that it is unjustified that CAP expenditures account for about 40% of the EU budget whereas the farm sector only provides 5% of jobs in the EU. The UK and other countries would like to see more money spent on issues related to the EU's economic competitiveness and growth.