Opposition to EU budget increase

Wed, Jul 11, 2012, 01:00

European Union governments will oppose plans for a sharp rise in EU spending next year, after diplomats agreed today to limit the increase in the region's budget for 2013 to 2.8 per cent, potentially hitting debt-ridden peripheral states.

Countries struggling to contain national budget deficits reacted angrily to proposals by the region's executive commission in April to lift EU spending to €138 billion next year - a rise of 6.8 per cent.

"The council's position reconciles the necessity to avoid undue burden on national public finances in times of fiscal consolidation with the need for growth-enhancing measures," the EU Council of Ministers said in a statement.

The European Commission has defended its budget proposal, saying the increase is needed to pay for EU infrastructure projects and other funding commitments that have already been approved.

Earlier this year, the commission warned that extra funds were needed to avoid potential budget shortfalls in 2012 and 2013, which it said would add to the debt burden of countries such as Greece, Portugal and Ireland.

Governments want to trim about €5 billion from the commission's proposal, with suggested cuts falling mainly on regional development aid and overseas spending in areas such as development assistance and trade promotion.

The 2013 budget proposals must be jointly agreed by governments and the European Parliament, which traditionally seeks to defend EU spending from deep cuts by national capitals.

Negotiations on the 2013 budget will have extra significance this year, thanks to parallel discussions on the region's next long-term budget, for 2014-2020, worth a proposed €970 billion.

If governments and lawmakers are unable to reach agreement on the EU multi-annual financial framework (MFF) by the end of next year, the 2013 budget will be rolled over to subsequent years until a deal is reached, giving governments an extra incentive to limit any proposed rise.

The lion's share of the EU budget goes to income support for farmers and road-building and other infrastructure spending in poorer EU regions, which together account for about three-quarters of total spending.

Reuters