EU budget about more than money

Some have said that the Commission was aiming too high and would antagonise its paymasters, writes Denis Staunton

The European Commission's presentation of its budget proposals for 2007-2013 marks the start of 18 months of political wrangling that could overshadow the dispute over the EU's constitutional treaty. It also offers citizens an opportunity to consider what the EU does for them and to assess the direction the Union will take over the next decade.

The Commission President, Mr Romano Prodi, said yesterday that the Commission's proposal should not be seen as a technical accounting document, but as a political declaration.

"Every organisation's financial plan is an expression of its underlying principles. The Union's principle, I would like to stress, is the solidarity between citizens and between member-states that sees resources transferred from the wealthier countries to the poorer countries and regions.

"Our plan is in line with this underlying political choice and develops it in a new way that places cohesion policy more clearly at the service of competitiveness and employment than was previously the case.

"There are basically three reasons for this decision: it is a choice for coherence, a choice for justice, and a choice for opportunity," he said.

The Commission's proposal identifies three political priorities for the EU: sustainable development, "European citizenship" and the EU's role in the world.

It proposes more investment in research, education and transnational transport links to boost European competitiveness. For the Commission, European citizenship means more common action on asylum, immigration, the fight against crime and terrorism and greater cultural exchange between member-states.

Enhancing the EU's role in the world means using economic instruments such as development aid and trade liberalisation as well as military and diplomatic power to enhance security in Europe's neighbourhood and beyond.

At present, agricultural subsidies and regional funds account for almost 80 per cent of the EU's budget. This is not about to change, not least because the member-states have agreed to keep agricultural spending close to its present level until 2013.

The Commission argues that, if the EU is to perform all the tasks member-state governments ask of it, adequate funding must be provided. As Ireland's Commissioner, Mr David Byrne, put it yesterday, if the member-states want the EU to spend less, "then stop asking us to do all these things".

The EU is funded partly by agricultural levies, customs duties and a share of VAT, but almost three-quarters of the budget comes from contributions from member-states based on Gross National Income (GNI).

The budget cannot exceed 1.24 per cent of the EU's GNI, and the Commission's plan, which amounts to about €900 billion over seven years, would account for an average of 1.14 per cent of GNI each year.

The EU's biggest six net contributors - Germany, France, Britain, Sweden, Austria and the Netherlands - want the budget for 2007-2013 to be capped at just 1 per cent of GNI, a figure the Commission has dismissed as unrealistic.

During yesterday's Commission meeting that finalised the budget proposal, some commissioners warned that the Commission was aiming too high and would antagonise its paymasters.

The net contributors argue that, with national budgets under strain and restricted by the Stability and Growth Pact, more money for the EU is simply not available. Germany's Finance Minister, Mr Hans Eichel, said yesterday that, if he was to send more money to Brussels, he would have less to spend on Germany's impoverished eastern regions.

Until now, Ireland has received more in EU subsidies each year than it pays into the EU budget, making more money for Brussels good news for the State. The country's increased wealth means, however, that Ireland will soon become a net contributor to the EU, presenting the Government with a dilemma as it considers its response to the Commission's proposal.

Regional funding will be directed increasingly towards the 10 new member-states, with funding to poorer areas in the current member-states being phased out. Commission officials warn, however, that a tighter budget could see subsidies to regions in Ireland and Spain being ended abruptly so that poorer parts of the EU can benefit.

Mr Byrne suggested yesterday that a smaller budget could also call into question the deal among member-states to leave agricultural spending near its present level until 2013, with potentially serious consequences. He maintains that EU funds to boost the economy in central and eastern Europe would benefit Ireland in any case, by creating new markets for exports.

The start of the budget debate enhances the argument in favour of an early resolution to the dispute over the EU's constitutional treaty, which has pre-occupied the Taoiseach since the start of Ireland's EU Presidency. Germany has stated explicitly that it views the two issues as linked, with an implicit warning that Spain and Poland could be punished financially for intransigence over the treaty.

Arguments over money can poison any atmosphere, but the danger is especially acute within the EU, where community funds, although tiny compared to national budgets, are targeted at politically sensitive economic areas.

If the dispute about wealth becomes entangled with one about power, as in that over the constitutional treaty, it will be difficult to avoid damaging the political mood in Europe in a way that will affect the EU's capacity to act in the interests of its citizens.

The Minister for Finance, Mr McCreevy, spoke eloquently yesterday about the central role of EU funding in Ireland's economic renewal and made it clear that the Government would consider this experience in its response to the Commission's budget proposal.

As the Taoiseach enters the critical phase of negotiations over the treaty, it is to be hoped that he can impress upon his counterparts the urgency of an early decision before the European debate descends into a nasty brawl over euro and cent.