EU leaders headed into difficult talks on the bloc’s 2014-2020 budget yesterday under the watchful eye of a newly assertive European parliament hostile to any major spending cuts.
In November last year, they tried and failed to narrow sharp differences and while most expect a compromise to emerge this time, there is no certainty other than that the budget talks will be long.
An agreement depends on finding a balance between British and German calls for cuts, and French and Italian demands to ring-fence money for investment in areas that can generate jobs and growth.
Late on Wednesday, French President Francois Hollande hosted German Chancellor Angela Merkel for what a German spokesperson described as “a short, but intense meeting ... to see what kind of agreement could be made.”
The two leaders “set out their desire to see EU heads of state and government reach a good agreement,” a French presidential adviser said.
The European Commission, the EU’s executive arm, initially wanted a 5 percent increase in member state contributions to 1.04 trillion euros (US$1.4 trillion) for 2014-2020, but EU President Herman Van Rompuy cut that back to 973 billion euros for the failed summit in November last year.
Now the task is to get closer to 900 billion euros, or about 1 percent of the EU’s total GDP — modest on that basis, but crucial at the margins for many member states.
The differences are serious enough, but the situation has also been clouded by British Prime Minister David Cameron’s promise of a referendum on EU membership if he can renegotiate London’s ties with Brussels.
“I can’t exclude that we fall for the sirens of ridicule,” said Luxembourger Prime Minister Jean-Claude Juncker, Europe’s longest-serving head of government and the doyen of such gatherings after eight years chairing the eurozone finance ministers’ forum. “We will correct the figures downwards, not upwards.”
The EU parliament, meanwhile, has been flexing its muscles as its approval is now needed for any budget deal, with assembly head Martin Schulz saying lawmakers were ready to throw out any agreement they think falls short.
In a possible foretaste of things to come, several leading EU lawmakers have warned against “suicidal” or “fraudulent” fixes that undercut growth and jobs.
The focus up to now has been on total contributions or commitments made by member states, but with Britain pushing hard for cuts, the emphasis has switched to the other side — the actual amount of spending.
That leaves the question of what happens if the EU were to spend all the budget up to the commitments agreed, and then Britain and perhaps others refused to make up the gap.
In that event, the EU would face the prospect of running a budget deficit, uncharted territory for Brussels, if all too familiar to national governments.
Van Rompuy sounded positive of getting a deal on Wednesday.
“I am confident that with some adaptations, the proposal I made on 22 November can constitute the basis for a deal,” he said.
The budget tops the agenda for the two-day summit, with today’s sessions set to cover relations with the EU’s north African neighbors, and progress on free-trade deals with the US, Japan and others.