Uncertainty as EU talks resume

Fri, Nov 23, 2012, 00:00

Analysis:  It’s difficult to say with precision where the negotiation will go but the sense as EU leaders return to the summit chamber to attempt to agree a new seven-year financial plan is that the real talking is imminent.

European Council president Herman Van Rompuy tabled a compromise proposal around midnight and, without substantive discussion, sent the leaders away for a night’s sleep. They’re back the building again now, primed for action but facing what could be long journey into the night.

No-one really knows whether there will be a deal. In spite of gloomy remarks early this morning from German chancellor Angela Merkel, European officials say it’s only now that the true engagement gets under way.

It is widely acknowledged in the Justus Lipsius complex that the latest Van Rompuy draft goes nowhere close to meeting the demands of British prime minister David Cameron. By the same token, the argument goes that there is much scope for compromise for later in the talks.

“There’s still plenty left in the tank and there’s a large centre of gravity behind last night’s proposal,” said one summit insider.

To the suggestion that many countries are displeased with the latest proposal, this person argues that that is not so bad “so long as everyone is equally unhappy”.

Others however are more downbeat. "I think they'll call it a day today. I think they are too far apart,"said another summit participant.

It’s that kind of a scene. What the new draft does is to set the ball rolling again after prolonged bilateral engagements.

By putting €7.7 billion back into the agriculture budget and €11 billion, Van Rompuy is trying to appease two discrete coalitions.

The first of these includes the agriculture-loving France and its allies such as Ireland and Italy. The second corrals the less wealthy countries of southern and eastern Europe who rely heavily cohesion to modernise their economies.

While the feeling right now is that there may – just – be enough here to bring French president François Hollande on board, Mr Van Rompuy may have to go further still to reel in the deal.

The latest proposal is not altogether bad for Taoiseach Enda Kenny, but it still points to a cut in Ireland’s allocation from the Common Agricultural Policy.

The original plan from the European Commission would erode the CAP by 9 per cent and Mr Van Rompuy’s initial demand was for a further 6 per cent, or €25 billion. As it stands, the cut over the Commission proposal would still be in excess of €17 billion.

While the exact impact for Ireland remains unclear, the basic principle in this arena is remains the same: the bigger the overall cut the bigger the threat to Dublin’s allocation.

In this light, there’s still purchase to be had for Mr Kenny and Mr Hollande.

Similarly, summit sources say it’s not altogether a given that the countries in the “Friends of Cohesion” group will flock to the new plan. “There’s a lot of them and there’s a range of views,” the summit insider says. Although Van Rompuy has obliterated almost half his proposed cut, he may have to yield yet more.

He has funded these two reduced cuts by taking from the “Connecting Europe” transport and energy initiative, as well as from the allocation for external relations and from the “Horizon 2020” research scheme.

But a deal is not yet within his grasp. The biggest question of all centres of British prime minister David Cameron. The sense in summit-land is that Van Rompuy has done nothing to appease Cameron in the new draft.

For one thing, the overall size of the €1.036 trillion budget commitment remain the same as in the previous proposal. The €80 billion cut from the Commission’s proposal remains intact, but no more than that.

For another, Van Rompuy has not touched his existing proposal to scrape €500 million from the EU’s administration budget for 2014-2020. This is hot topic for Downing Street but EU Commission chief José Manuel Barroso is not wont to give ground.

German observers of the fray say Mr Van Rompuy and Mr Barroso will have to go much further than that to bring Cameron on board. The saying goes in the corridors here that there’s “not even a glimpse of hope” for him in the latest plan.

But this is still a relatively early in the game. As the talks resume, Mr Van Rompuy’s midnight gambit looks like an attempt to square off tricky but soluble items first before delving into the really difficult stuff.

Mr Cameron may decide that it is better to cut and run, collapsing the deal but receiving a hero’s welcome from the Tory Eurosceptics. He may feel, however, that this would be bad for relations with his coalition partners in the Liberal Democrats.

A year after his veto on the Fiscal Treaty, the British leader may also be reluctant to antagonise his EU partners relations ahead of the next summit - in three week’s time - in which the they will seek to finalise the their “banking union” plan. Mr Cameron has a big interest in that particular debate.

This a complex picture with many moving parts. There are 28 countries to be satisfied – the 27 existing members of the union plus Croatia, which joins next year. Everyone has something to gain or lose. Right now, for example, the feeling in Italian circles is that Rome stands to rank among the biggest of all losers. Can Mario Monti accept that? Hardly.

Any deal must also win the support of the European Parliament. For the package to go ahead, it requires approval from an absolute majority of MEPs. Martin Schulz, president of the parliament, sounded a warning note when he met the leaders last night. “Advocating cuts in the EU budget may be popular, but it is hugely irresponsible,” he said.

“We, the representatives of the peoples of Europe, are categorically opposed to the freezing of the EU budget, let alone to cuts in that budget.”

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