When the European Council meets next week in Brussels, the budget for the period 2007 to 2013 will be at the top of the agenda. The budget, which failed to gain the approval of all the EU member states last June during the Luxembourg presidency, is of utmost importance to the future of the union.
On Monday evening, British Prime Minister Tony Blair presented his presidency’s comprehensive proposals for the budget, a package that aims to instil budget discipline and, at the same time, help the new member states in the enlarged EU to build their economies and societies, and distribute the costs more fairly among the better off nations.
Mr Blair’s proposals see an overall reduction in budget spending but that includes a 10 per cent cut in funding for seven of the new member states – Malta, Cyprus and Slovenia are not affected. The overall size of the budget would also be reduced to e847 billion from the e871 billion proposed by the Luxembourg EU presidency.
The UK is also keeping the rebate, the subject of much debate in the UK and Brussels. The proposals also ensure that there can be no fundamental change in the rebate without a fundamental reform of the Common Agricultural Policy (CAP). Funding for the CAP was agreed in 2002 by all 25 members states and there is little hope that French president Jacques Chirac will reopen the debate.
As things stand, however, the initial response to the EU’s budget proposals has been cold. Under the UK proposal, the Germans and Dutch would be better off under the deal and the Swedes, French, Spanish and Italians would stay much the same, while a proposed cut in funds for the EU bureaucracy would hurt Luxembourg and Belgium. For Malta, Cyprus and Slovenia, the proposals will not have a negative impact on funding.
Judging by the first reactions, the British presidency’s proposals stand little chance of being approved. Poland and Hungary, for instance, have made it clear that the deal is unacceptable while the Commission, led by president Manuel Barroso, has described the budget proposals as unrealistic and detrimental to members such as Belgium and Luxembourg. He said the proposals had “no ambition at all” to fund an expanded union.
Failure to reach agreement during the Council meeting on 15 and 16 December could prove to be an embarrassment for Britain and another massive stumbling block for the EU as a whole. Failure to reach an agreement would leave the EU politically crippled at the end of a year that also saw French and Dutch voters reject the union’s proposed Constitution.
Where does that leave Malta? The government has not commented on the proposals, but Malta is one of the countries least affected. Although the budget does not include any increases in funding, Malta will not be hit by the proposed 10 per cent cuts for new member states. The reduction in the percentage of money Malta has to pay to gain the right to access EU funding – from 20 to 15 per cent – would help Malta increase its capacity to absorb and made better use of EU funds. The increase in the timeframe in which funds have to be used would also be of benefit.
Unless there is a major change of heart next week, the UK presidency and Tony Blair is in for one tough ride. Mr Blair has two weeks left in which to broker a deal on the new budget, but hope is fading fast. Another attempt to reach agreement on the budget could be made during the Austrian presidency that starts on 1 January, but even that is going to be unlikely. Otherwise, the EU member states will have to start operating under annual budgets – a prospect to which the EU will not be looking forward.