The Joplin Globe, Joplin, MO

Business

February 8, 2013

EU leaders inch toward budget deal at tough summit

BRUSSELS — European Union leaders closed in on a deal that would cut the bloc’s budget for the first time in history and deliver a strong message that years of expanding EU powers were on the wane.

If a deal emerges Friday, the budget would still need to be ratified by the European Parliament, and early signs suggest that may prove problematic.

‘’The agreement of the European Parliament for the figures discussed is not imaginable,” said Hannes Swoboda, the socialist leader in the legislature.

The hard-fought summit in Brussels is, at base, a tussle about what the 27-nation European Union stands for: some leaders argue that it’s a drag on national budgets in tough economic times, while others say the economic crisis highlights the need for closer and deeper ties.

The deal that appears to be taking shape lean more toward the position of countries led by Britain, which are insisting that the EU can’t look for more money at a time of belt-tightening across Europe. Any deal though requires the approval of every member state, which means that each country has a veto.

Those countries want tens of billions of euros slashed off the (euro) 1.03 trillion ($1.35 trillion) originally set out. On Friday, the leaders were working off a proposal to reduce the multi-annual budget to (euro) 960 billion ($1.29 trillion).

Any reduction that emerges would be the first since the European Economic Community — the forebear of the current EU — was created in 1957.

In almost a symbolic snub of the EU bureaucracy, the proposed deal includes a two-year freeze on its salaries and promised a 5 percent reduction in staff to be compensated by having the remaining people work longer working hours.

The draft left many of the newer — and generally poorer — members, which see Europe as a club that is only as strong as its weakest member, fighting a losing battle for fully sustained funding. That group, led by Poland and France, argues that Europe means nothing if the budget isn’t used to bridge the wealth gap and help restart growth.

The proposals did put aside (euro) 6 billion ($8 billion) to help regions with more than 25 percent youth unemployment, which has skyrocketed because of the economic crisis over the past few years, notably in Greece and Spain.

Both sides had threatened to walk away from the table — again — if they didn’t get what they wanted. The first summit to negotiate a budget collapsed in November.

Adding to the complexity, the leader of the European Parliament warned late Thursday that his legislature was bound to reject the budget offer if it allowed for too much deficit spending.

The EU, with a population of more than 500 million people and an annual gross domestic product of (euro) 12 trillion ($16 trillion), is the world’s largest economy.

The EU budget, which is separate from the national budgets, is designed in part to balance out the economic development of the region by injecting funding into poorer countries. The EU has funded hundreds of thousands of infrastructure and capital projects over the years, from the installation of a broadband network to upgrading parts of the road network.  

The budget includes items meant to generate economic growth in the future, such as research and development, increasing digitalization and creating a new, more accurate satellite navigation system. It also funds regulation and administration in such areas as mergers and competition, the review of national budgets to ensure they do not include excessive deficits and — now — banking supervision.

Over two days, the leaders were negotiating tooth and nail over an annual difference to the average European taxpayer of (euro) 20 ($27). The most generous budget proposal would cost the average taxpayer (euro) 295 ($400) a year; the most pared-down proposal would cost (euro) 275 ($373).

The EU’s budget for 2012 is (euro) 147.2 billion ($199.4 billion) — less than one-fifth the size of the budget of the U.K. alone.

Leaders staked out uncompromising positions throughout the talks.

While France’s economy is the EU’s second-largest, it supports poorer countries and is a strong advocate for wealth-sharing. And France itself receives a significant amount of money in agricultural subsidies.

Most of the EU leaders came in with a national agenda in mind, and Czech Prime Minister Petr Necas said the proposals he had seen so far were “unfair.” He threatened to use his veto.

 

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