Brussels defends 5% budget increase for 2012

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The European Union's budget chief defended plans yesterday (20 April) to increase the bloc's spending by 4.9% next year, saying the proposal struck a balance between austerity and the need to boost growth.

Budget Commissioner Janusz Lewandowski said he expected tough negotiations over his plan to raise spending to €132.7 billion, a target which must now be jointly approved by EU governments and the European Parliament.

Germany, Britain, France, Finland and the Netherlands are strongly opposed to any above-inflation increase in the budget, a stance that has forged division in the EU, with richer northern countries split from some southern and eastern ones.

"Some ask why we would increase the EU budget when member states face severe austerity measures at home; this is a legitimate question," Poland's Lewandowski acknowledged.

"The main reason for the increase is that we must pay the bills coming from projects from across Europe," he said, referring to EU infrastructure grants for poor regions, and funds for research and innovation projects.

The proposal faced almost immediate opposition from some of the EU's 27 governments, with Britain, a large net contributor to the budget and a country which is enforcing strict spending cuts domestically, saying the increase was unacceptable.

"We want the best deal for the UK taxpayer and a 4.9% increase in the annual EU budget is not acceptable," said a British government spokesman in Brussels.

"We'll be working closely with other member states to drive the hardest possible bargain."

Late last year, Britain, Germany and France demanded the long-term EU budget be frozen until at least 2020, to ensure the bloc's spending reflected the cuts being made to public spending at national level.

But they face strong opposition from Poland and other net recipients of funds from the budget when talks start on the next long-term budget, which runs from 2014 until at least 2020.

Public opposition

An above-inflation spending rise in 2012 could also fuel growing public opposition to the EU in parts of Europe, adding to the resentment felt at the hundreds of billions of euros in taxpayer funds being used to bail out eurozone countries such as Greece and Ireland.

With Eurosceptic parties seeking to use rising anti-EU sentiment to their advantage, as Finland's True Finns party did in a parliamentary election on 17 April, many governments could also see the proposal as an electoral threat.

"How can we explain to our citizens who are tightening their belts that the European budget simply keeps on growing?" Dutch Finance Minister Jan Kees de Jager said.

"In the coming months I will work hard towards a substantially lower European budget than proposed by the Commission today," he said.

More than two thirds of EU budget spending goes to subsidise farming and for structural projects such as road building.

The Commission has proposed cutting money from underperforming programmes next year and freezing its own spending on administration at 2011 levels, in a bid to keep the budget increase to a minimum, Lewandowski said.

A rise is inevitable though, he said, as funding commitments will increase as the EU enters the penultimate year of the current spending period, and a rise of less that the proposed 4.9% would result in a breach of existing contracts.

Last year, the Commission proposed a 5.9% rise in EU spending for 2011, but the increase was eventually capped at 2.9% following a long tussle with EU governments, a battle led by Britain with backing from several others.

Talks on spending in 2012 are seen as a prelude to much tougher negotiations for the EU's next long-term budget from 2014, which will get underway when the Commission makes proposals later this year.

(EURACTIV with Reuters.)

Laurent Wauquiez, French secretary of state for European affairs, said the Commission's calls for increasing the EU budget was "not acceptable".

"All European countriesare making unprecedented budgetary efforts, we can not understand that the European Commission does not follow the same logic," Wauquiez said. He added that the 2012 budget rise should identical to the previous year – or 2.91%.

"We are asking for the European budget the same effort being imposed for national budgets, which is the stabilisation of spending," Prime Minister Francois Fillon said during a Brussels visit on 14 March.

"We welcome the emphasis on growth and cohesion in the draft 2012 EU budget presented [yesterday], and on European added-value. Next year's budget again hopes to be realistic about the current economic realities, but also ambitious in achieving the goals the EU has set itself with the Europe 2020 strategy," said Romanian MEP Marian-Jean Marinescu, European People's Party group vice-president in charge of Budget and Structural Policies.

"The EU budget has an advantage in that it is more investment focused, a feature that can complement member states' efforts to counter the effects of the economic crisis. For 2012, the Commission was right to propose intensifying investment into growth and jobs, and research and innovation," Marinescu continued.

According to the Socialists & Democrats group in the European Parliament, the proposed budget for next year is a "minimal" effort to counter the economic crisis.

The group warned that the EU needs at least €1,800 billion in the next 10 years to make the EU 2020 strategy for jobs and growth happen. It added that as well as contributing to that effort, next year's budget should allow the EU to shoulder its global responsibilities, especially in the wake of the Arab Spring and unrest in North Africa and the Middle East.

Said S&D budget spokesman Göran Färm: "There is a strong temptation in some EU capitals to cut EU spending because of the need to cut national deficits. This approach is counterproductive. The EU budget is an important tool for European solidarity, aiming at promoting even, economic development of the whole Union. Substantial cuts would benefit richer member states only in the short term but in the long term they would harm the European economy as a whole." 

"The EU budget – which represents less than two per cent of public spending in the EU – cannot be the scapegoat of a right-wing, austerity-minded, economic policy that endangers economic growth and social cohesion," Färm added.

"The total deficit run up by EU governments in 2009 was €801 billion. In contrast, the EU budget cannot run any deficit. It cannot be held responsible for worsening the public deficit in member states."  

UKIP MEP and former EU Chief Accountant Marta Andreasen, who sits on the European Parliament's budget committee, said in a statemen that Lewandowski used the 99p tactic to mask a rise of almost 5%.

"There is a fundamental wrong in demanding austerity from every member state and trying to strait-jacket their budgets citing the financial crisis, yet asking for a rise for yourself. It is as if the European Commission sees itself as detached from the real world and immune from the financial crisis," she said.

"The draft budget looks at the 2020 strategy for its projections. In doing so it conveniently ignores past programme efficiency across the various budget lines. That aside, we only need look at the doomed Lisbon Strategy to see how far projections based on castles in the sky get you," she added.

Andreasen was echoed by British Conservative MEP Martin Callanan, Tory leader in the European Parliament, who stressed that "last year we saw a 2.9% increase in the EU budget. That was already too high. Yet another inflation-busting rise is outrageous".

"Every other public sector organisation is tightening its belt and the EU must do the same. Conservative MEPs will not accept an increase in the EU's budget."

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 a decrease in 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, or an EU-wide 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.

  • June 2011: Council will make its position known on the Draft Budget 2012. 
  • June 2011: Commission to present plan for long-term, post-2013 budget.
  • October 2011: European Parliament will present its position on Draft Budget 2012.
  • November 2011: Final 2012 budget expected to be adopted by European Parliament.


Measure co-financed by the European Union

This project has been funded with support from the European Commission. This publication [communication] reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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