Details

Discussion

Executive summary

Two decades ago budgetary wrangling, notably over the British rebate, cast a long dark shadow over relations between EU Member States. Today, fierce disagreement is again raging between those countries seeking to limit EU spending to one percent of GNI, and those supporting the European Commission's case for 1.14 percent. The Friends of Europe 'Café Crossfire' debate on the Financial Perspectives sought, then, to clarify the most likely outcome. Participants examined which countries stand to win or lose the most, what aspects of the EU budget must be maintained, and how far new EU member states will be disadvantaged.

There is a serious risk that the negotiations over the EU financial perspective 2007-2013 may well not be completed during 2005. This may cause a re-evaluation of such key European policies as the Common Agricultural Policy, Research and Development and also areas like cohesion policy. For many participants, such an outcome would open the risk of creating a Europe of have's and have not's rather than implementing promised cohesion.

Introduction

Dr. Peter R. Weilemann

Director of the European Office of the Konrad Adenauer Stiftung, welcomed guests on behalf of Friends of Europe and the Konrad Adenauer Stiftung. Talking about money always raises interest, noted Weilemann, but the degree of interest in this debate on the Financial Perspectives has nevertheless been surprising. The

topic is important and marks how serious the EU is about the challenges faced. This debate should focus minds on how EU money must be spent.

Gideon Rachman

Brussels Bureau Chief of The Economist, noted that although the EU budget is often regarded as dry and technical, the number of the participants in this 'Café Crossfire' debate indicated the great interest there is in discussion of the 2007-2013 Financial Perspectives. Rachman said that whilst there may conceivably be an agreement within a few months, most observers think this unlikely.

Jean-Claude Thébault

Principal Advisor in the Cabinet of President Barroso, noted that the Commission has recently finalised its proposals for the Financial Perspectives. Negotiations are now entering a more active phase, and the Commission hopes they will be concluded in June. With agreement on the Stability Pact and the Lisbon Agenda, there is momentum again. Failure to agree on the Financial Perspectives would have negative consequences on the EU's capacity to cope with the new challenges it faces following enlargement, said Thébault.

Reimer Böge MEP

Rapporteur for the European Parliament on the Financial Perspectives, noted that his report points to an overall package only slightly lower than that of the Commission as regards total expenditure. Discussions with the Council are progressing although there needs to be more focus on concrete figures. The best way, according to Böge, is that of focusing on the European Commission's tasks to be completed rather than setting prior limits on spending. The debate in certain Member States on the Financial Perspectives needs a greater dose of realism, and Böge said that this means looking at all positions to see if they are tenable. He added that the Union's political commitments must be maintained, and asked whether effectively cutting the EU's budget meant reopening the financial deal on the Common Agricultural Policy or reviewing the Lisbon goals and other policies?

Böge presented his draft for a resolution on the Parliament's position on the Financial Perspective. The views of the Temporary Committee on the Parliament’s position are to be

voted in the June plenary session. The position makes it very clear to Member States that there will be no Financial Perspectives without the agreement of the European Parliament. Based on the Constitution, Böge explained, any agreement will need an absolute majority of the EP. If there is no agreement, the fall-back options will be along the lines of the Inter-institutional agreement (Article 26) or the Treaty of Rome (Article 272). For Böge, there are minimum demands that the Parliament is not willing to negotiate. If the policy

goals given by those six countries, which are pushing a

one percent limit, are examined, then one realizes their

position is not realistic, he said. Böge noted that the Parliament is generally positive on the Commission's proposal, on its structure and on its focus on goals like the Lisbon strategy and sustaining the environment. But for Parliament there will be certain priorities based on the Lisbon strategy and future challenges. The Parliament backs the Commission's proposals, for example, on research. The Council needs to be continually reminded that there is a special need for 3 per cent of GNI being devoted to research and development to keep up with the US and Japan. Trans-European Networks are also in need of key support and Member States must commit financing. Lifelong learning, too, is a further priority that needs to be guaranteed as are

regional, structural and cohesion policies. There are minimum levels of financing as to these policies. Böge also noted that financial planning should be based, on the period of office of succeeding Commissions. He said, this is a democratic question, with the EU budget tied to the period of

the Commission, and thus allowing Parliament to fulfil its democratic duty.

Jaroslaw Pietras

Poland’s Minister for European Integration, noted how various debates on the Financial Perspectives have created an impression that some Member States are opposing both the Commission and the Parliament. But new Member States, he said, are much more aware of the wider goals of the European Union and the need for a corresponding budget to implement them. There is a greater need for competition. In his own country, for example, Pietras noted how the transport network remains a barrier to greater development. This is also a challenge for other EU countries. The budget must be based on meeting the challenges the Union faces. If we want deeper Union then we need the corresponding funding.

Pietras

also said there lies a paradox in the debate on 1% or 1,14%. Richer countries talk of benefits and net contributions, but in terms of percentage GNI such countries contribute less

than poorer countries. This is the paradox of today's debate on the Financial Perspectives. The poorer are paying more. For this reason, Pietras said he opposes the one percent

budget cap proposed by certain Members. In this context, Poland is very supportive of the European Commission's position and of EU policies that are decided jointly by all Member States. Pietras also praised the Parliament for thinking in terms of the whole EU and of common goals for the whole European.

Gideon Rachman

remarked that not a single supporter of the 1% budget cap appeared to be present in the Bibliothèque Solvay . There is, nonetheless, a widespread opinion, and not just in the UK, that much of the EU budget is wasted, with over 40% being spent on the anachronism of the Common Agricultural Policy.

Reimer Böge MEP

said that the UK's position has been double-edged, on the one hand supporting a 1% budget cap whilst defending its own receipts from the Common Agricultural Policy. If there is a limit of 1%, then spending will be reduced on the Common Agricultural Policy. The EU needs to look again at policies like the Common Agricultural Policy, however difficult this might be for some Member States. But it is necessary that we start a debate on Own Resources to avoid continual debates on net contributions. This item must be discussed not on national agendas but as a long-term perspective of the EU.

Alberto Mazzola

of Italy’s Ferrovie dello Stato commented that funding for Trans-European Networks as large cross-border projects must be seen in a longer-term perspective because they represent common European goals. Such policies are essential to the EU. Should there be a flat contribution for the EU budget – in terms of GNI – then this should be the same for all Member Countries.

Jaroslaw Pietras

recalled how Poland is one of the highest contributors in terms of GNI percentage. It pays its contribution, but receives no rebate. Is this just, he asks?

Reimer Böge said that he accepts almost all legislative proposals made by the Commission, but he had doubts concerning the Growth and Adjustment Fund. More than €9bn in EU spending is not covered by legislative proposals during the period of the Financial Perspectives, which he found unacceptable. The Commission should implement simpler

rules for the financial regulations for projects.

Giles Merritt

Secretary General of Friends of Europe, asked the three speakers what they though are the chances of obtaining a deal during the Luxembourg presidency. In light

of the upcoming referendum in France on the EU Constitution, he asked, if an agreement on the Financial Perspectives is likely before next year?

Jean-Claude Thébault

replies that a deal will not be easy. Nonetheless, he feels that a window of opportunity exists. Decision-makers should build on the momentum gained recently due to the agreement on Stability Pact reform. If there is no deal during the work of June, then agreement will be very difficult during the rest of 2005. Member States must recognize the goals facing the EU and provide the financial means to achieve them.

Reimer Böge

also said a quick deal will be difficult. The position of the German government, for example, is still 1%, which is unrealistic. If there is no agreement on the Financial Perspectives then Böge calculated that spending could be 1,06% or 1,07% of GNI. For Böge, a key point of criticism is that Member States are increasingly negotiating on the basis

of national interest and not with the European Union as

a whole in mind.

Jaroslaw Pietras

sees the deal as a question of will. Poland is prepared to agree provided the eventual deal is satisfactory. But the basis for agreement should be what the EU wants to

achieve, and should provide it with the necessary means to do it. If there is no deal in June then Pietras feared all policies may be reviewed. This means further and longer discussions

till 2006 with all problems that would stem from such a delay. An agreement in June would, according to Pietras,

guarantee consistency and a long-term vision for the EU. For Pietras, Member States should be less inward-looking

when discussing the future of the European Union.

Marc Kleinenberg, NRC Handelsblad, noted the scepticism in the Netherlands as to EU expenditure with some European projects raising many eyebrows. Why not stop the cohesion funds in the 15 older Members and give the money to the new States?

Jaroslaw Pietras

replied that it is not possible to save money by simply reshuffling money. The Union aims at achieving common goals and there is a need to confront the problems

that exist throughout the EU.

Reimer Böge

noted that the former East Germany has Objective 1 status, but many regions in Western Germany are now facing a reduction or re-evaluation of social and structural

programs.

Final questions and conclusion

Tim Franks, BBC Correspondent, referring to the British government's position said that the forthcoming referendum in the UK on the EU constitution would be extremely difficult if

the British rebate were torn up. He asks which is more important to remove the iniquities of the British rebate or to have the UK say 'yes' in the referendum.

Jaroslaw Pietras regretted that discussion on the future of the EU and national interests are so closely linked. The risk of further linkages is that they may prevent agreement on the vital challenges and tasks faced by the European Union.

Reimer Böge remarked that British eurosceptics should actually vote for the new European Constitution as it would hold out the possibility of leaving the Union. For Böge, the existing financial system, with new Member States financing part of the British rebate, has no future. There must be new and more efficient ways of internal rebalancing and it is up to the Council to finally agree upon this. Member States must understand the general interest of the European Union when discussing financing.