EU budget plan a tall order for calculator crew

EUROPEAN DIARY: European leaders are bracing for an almighty scrap over a new seven-year budget round for the EU. Trying to find a way through this infinitely complex issue is rather like entering spaghetti junction in a blizzard.

For Taoiseach Enda Kenny, the bottom line is that he needs to conserve Ireland’s €1.7 billion share of the annual agriculture budget. Even as the 40th anniversary of Ireland’s accession to the then European Economic Community looms, the State’s abundant woes mean it will continue to be a net beneficiary of EU largesse for some years to come.

Laborious talks have been ongoing since June 2011, when the European Commission published a draft spending plan for the years between 2014 and 2020. The negotiation is set to come to a head in a fortnight when leaders gather in Brussels for a summit to settle the matter.

European Council president Herman Van Rompuy is already talking about this being a “four-shirt” affair, meaning the talks might drag on from Thursday morning until Sunday night.

While no one here contemplates that with any enthusiasm, the push for a speedy deal on the broad spending parameters reflects the need to pin down the nitty gritty in time-consuming legislation next year so the new plan is in place for 2014. This huge task will fall to Ireland’s incoming presidency of the EU.

Unresolved tensions in the euro zone add further to the political pressure to get the budget squabble out of the way. With money tight everywhere, this is already proving acutely problematic. Any failure to strike an agreement this month would see the issue kicked into the new year, adding further to the demands on the Irish presidency. But that is a real prospect, even if negotiators say a partial deal might yet be reached. “This is a very, very fluid situation, moving all the time,” says one.

Other countries have taken umbrage at British demands for a budget freeze, yet prime minister David Cameron is besieged by noisy Tory Eurosceptics who are demanding a budget cut. This has already led informed observers to predict no deal will be done this month.

Cameron’s meeting with German chancellor Angela Merkel last night in Downing Street stands as an attempt to head off a breakdown.

At the same time, efforts by the Cypriot presidency of the EU to broker a compromise are not going well. Well-placed official sources say a fresh proposal last week from Nicosia was almost universally rejected.

At issue first is the basic €1.033 trillion plan from the commission, which represents a rise of about 3 per cent. When items previously in the formal budget but now excluded from it are taken into account, the total package would rise by about 5 per cent to €1.09 trillion.

Increases of this magnitude are contentious in wealthy donor countries like Germany. It is to the fore in the group of big net contributors who form the “better spending” bloc, this title being a euphemism for cutbacks.

Drama

It is widely recognised (outside Britain) that some kind of a rise is in order. Divining the magic number is what the summit is all about.

Pushing for a generous budget increase is the Polish-led “friends of cohesion” bloc, which is pressing for more EU spending to modernise the economies of the former eastern Europe and countries like Greece and Portugal.

The force of competing interests suggests drama is inevitable once the real talking begins. The latest Cypriot proposal would take some €11 billion from agriculture, while stripping up to €18 billion from research and growth-boosting initiatives and up to €13 billion from the cohesion budget.

This was not greeted warmly in Dublin, which backed the original commission proposal even though elements of it threaten Ireland’s agriculture receipts. But the Government liked budget proposals to strengthen the competitiveness of the European economy.

Although the bailout and matters arising mean that the Taoiseach’s negotiating hand is pretty weak, he has the key advantage that French president François Hollande is campaigning to maintain agriculture spending.

Crucial too, say officials, is the sense in countries like Germany, Italy, Denmark and the Netherlands that any appreciable reduction in agriculture spending would increase their net contributions. That is not to be underestimated, even if France remains the most open and vocal supporter of the common agricultural policy. Nevertheless, agriculture remains vulnerable and this is a prime concern for Kenny.

The next phase of the process will see Van Rompuy table his own compromise proposal, probably next Tuesday.

Related but separate talks take place tomorrow on the EU budget for 2013, the final year of the current funding plan. These are busy days for the calculator crew.