EU budget talks collapse

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EU finance ministers failed to reach a compromise with the European Parliament over the 2011 budget yesterday night (11 November). If they fail to find a mutually acceptable solution by Monday, the 2010 budget will roll over to 2011, raising questions as to how the European Union will finance ambitious new projects such as the European External Action Service.

Polish MEP Sidonia J?drzejewska (European People's Party; EPP), the European Parliament's rapporteur on the EU budget, Parliament budget committee chairman Alain Lamassoure (France; EPP) and Parliament President Jerzy Buzek signalled their readiness to accept member states' demand to increase the budget by just 2.91% for 2011, spearheaded by the UK [see 'Background'].

In exchange, however, Parliament representatives asked for a stronger language on their institution's say in negotiations over the next financial perspectives, including by providing for a "contingeny fund" and supplementing the budget with EU "own resources," such as a possible new tax to help fund the Union's budget after 2013.

Last week, German Chancellor Angela Merkel strongly rejected the idea of such an EU value-added tax (VAT), a tax on air transport or a share of new financial, corporate or energy taxes. Several other EU countries see such taxes as unfair, as they would see some countries pay more than others.

Member states rejected the Parliament's proposal for guidelines on negotiating the 2013-2020 financial perspectives and diplomats blamed MEPs for what they said were unacceptable demands. In return, Parliament representatives blamed richer states, who in their words do not want to pay for policies which benefit their neighbours as well [see 'Positions'].

Melchior Whatelet, the budget minister for Belgium, the country holding the rotating EU presidency, said the procedure for seeking an agreement was still ongoing, with a final meeting scheduled for Monday 15 November.

Budget Commissioner Janusz Lewandowski warned that there would be consequences if the Union was forced to resort to the same amounts for 2011 as the previous year. He said that projects such as ITER, an international project to design and build an experimental fusion reactor in France, or the European External Action Service, expected to be launched on 1 December, may become victims of the dispute.

He also described as "catastrophic" the message that the EU would send to the world by failing to adopt a budget.

In a published statement, European Parliament President Jerzy Buzek said:

"Differences still exist between the European Parliament on one side and the Council on the other. Parliament is ready to accept the modest increase in payments in next year's budget as proposed by Council. We are not asking for one euro more on condition that our political expectations are met. I am confident that we will manage to iron out these differences in following meetings." 

"The Parliament is ready to have a deal on figures if there is an agreement on our political demands. We do not want to change the Treaty, we want a serious agreement on how we will work together in the future on EU financing including a new system of own resources, which could be the best way to reduce national contributions to the EU budget. The EP wants to have clear guarantees that next budgets will be put together in a serious and rigorous way. We need to put more order in European finances," Buzek added.

French European People's Party MEP Alain Lamassoure, chair of the Parliament's budget committee, also voiced his disappointment:

"In order to finish negotiations, you have to start them first. In spite of the Belgian Presidency's efforts, in spite of the agreement of a large majority of governments, some ten countries refused any negotiations. In the talks on the EU 2011 budget, Parliament isn't asking for a single euro more than the Council. Parliament is not asking for a Treaty change. We are proposing a political agreement on working together to avoid future budgetary crises and to ensure sustainable financing for future policies," Lamassoure said. 

"Today's failure confirms what everyone already knew: how difficult it is for states to finance future policies in a sustainable manner. Last year everyone tried to spend as much as possible in an attempt to support economic activity. This year, everyone is trying to spend as little as possible in an attempt to fight the debt crisis" he said.

"This failure shows very clearly the deep division between European countries regarding the financing of common policies which all have agreed to. All states want to profit from the European budget, but some richer states do not want to pay for policies which benefit their neighbours as well. It is incomprehensible, this refusal to work towards safeguarding the future of Europe as well as solidarity between European countries," Lamassoure concluded.

Polish MEP Sidonia J?drzejewska (European People's Party), the European Parliament's general rapporteur on the 2011 EU budget, said that the Parliament is ready to compromise with the Council but only if member states agree to discuss future EU financing – a request justified under the Lisbon Treaty.

''We are considering to agree to large cuts in our project for the 2011 EU budget in order to accommodate the maximum 2.9% increase in payments as requested by twelve member states. In return, we invited the Council to open a real discussion on the future financing of EU policies. By rejecting this invitation, a couple of member states created taboo subjects such as the Parliament's role in the negotiations of the next Multiannual Financial Framework or the own resources' issue. These expectations of the European Parliament are justified by the Lisbon Treaty and the Parliament expects a discussion only on the precision and interpretation of the Treaty," she stated.

"We cannot accept a situation where the Council agrees to take on board more and more commitments and tasks, but does not want to finance them," she added.

The EU budget is funded primarily from the contributions of member states. The overall budget for this year is equivalent to 1.04% of the EU's gross domestic product.

The 2011 budget is the first to be negotiated under the Lisbon Treaty, which confers rights of co-decision to the European Parliament equal to those of member countries.

At an October EU summit, UK Prime Minister David Cameron obtained the support of the leaders of Germany, France, the Netherlands, Sweden, the Czech Republic, Denmark, Austria, Finland, Slovenia and Estonia for the 2011 budget to be capped at a 2.91% increase over 2010, raising it to 126.5 billion euros. The European Parliament is looking for a 6.19% increase.

Poland's Sidonia J?drzejewska, the Parliament's rapporteur on the budget, said before the Ecofin council meeting that she believed a compromise could be reached, but it would depend on countries accepting that the EU cannot provide more services with less money.

J?drzejewska suggested that an increase of 4.5% - effectively splitting the difference between 2.9 and 6.2 - was a possible outcome.

If this month's negotiations fail then the budget, which must be approved by all member states, will be frozen at 2010's level and disbursed in 12 equal instalments.

  • 15 Nov.: Talks are expected to resume.

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