On Thursday 22 and Friday 23 November, the European Council held a special Summit in order to try to reach a consensus agreement on the terms of the Multiannual Financial Framework (MFF). The MFF will determine the budget of the EU for 2014-2020. Prior to this Summit, the President of the European Council Herman van Rompuy had submitted draft conclusions on the MFF, which several Member States expressed reservations about.
President Van Rompuy subsequently spent the afternoon of Thursday 22 November, meeting the leaders of all 27 EU Member States, as well as representatives from Croatia who will join the EU in July 2013. During this time, individual Member States also met with each other bilaterally in order to form potential consensus agreement over some issues. At this point, there was some speculation that Germany and France may have reached agreement over French proposals relating to the Common Agricultural Policy (CAP), the position being that Hollande was fighting to maintain overall spending on cohesion and agricultural policies.
Following the meeting on Thursday, another budgetary proposal was tabled. However, by Friday evening no consensus could be reached as the various positions were deemed to be too far apart, so it is likely that this issue will continue into 2013. If there is no deal up to the end of this year, there will be a rollover of the 2013 budget plus a 2% increase accounting for inflation.
This meeting took place as a background to the December Summit, where legislation to the Single (bank) Supervisory mechanism, and bank recapitalisation programme (ESM), was meant to be presented as contingent parts of the MFF. Now this is unlikely to happen in December. In its original submission, the Commission had recommended a 4.8% increase on the current budget, meaning that the EU budget would amount to over €1 trillion, but at this Summit, the EU Member States tried unsuccessfully to agree on a budget proposal worth €80 billion less than this, making a budget total of about €973 billion.
At this point it is important to note the various Member State positions, these fall into roughly two camps: those pushing for further cuts in the budget (above the €80 billion proposed by the Council), and those who have united against any cuts at all (the Friends of Cohesion Group). The former is represented by countries who give more to the EU than they receive in turn in investment, such as the UK, the Netherlands, Sweden and Germany. For them, cutting more than €80 billion is seen as the natural solution in a time of austerity, they believe that the Council proposal did not go far enough, and their preference was a cut to the tune of €200 billion, although Germany called for a cut of €100 billion. Since the budget 2014-2020 is to be financed differently, with new revenue streams being created to partially replace contributions based on the gross national income of each Member State, in practice, this could mean that net rebates per Member State will be reduced.
The ‘Friends of Cohesion’ Group (Ireland, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Greece, Hungary, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, and Spain), receive more in cohesion funding than they make in contributions. For them, the Council’s proposed cuts were controversial as they oppose any moves that could limit their development opportunities. The Council’s resulting €80 billion cut to the Commission proposal seemed to be a compromise position, an attempt to balance these competing interests.
By Friday however, the proposal had significantly changed, to reflect the positions of the various Member States:
A Second Proposal
At the outset, the Council had originally proposed an €80 billion reduction to the Commission’s blueprint, meaning that the EU budget would amount to roughly in the region of €973 billion. The proposal had outlined certain areas for budget targeting, and others for development:
There was to be significant new money for education and vocational training, and for research and innovation to create jobs in the areas of energy, IT and Transport. This was to improve the green economy as well as make existing industries more eco-friendly: 30% of agricultural funding would depend on farmers making the sector environmentally friendly.
It would also have strengthened the management of Europe’s external borders and put money into tackling serious crime, terrorism and cybercrime. Aid incentives would be provided for those countries, particularly in the Middle East and North Africa region, that deliver political and economic reforms to strengthen democracy.
After the meeting on Thursday, however, another proposal was tabled that changed these outcomes somewhat. It is possible that any further discussions may be based on this new proposal from over the coming weeks. The key outcomes as of Friday 23 November were:
- The general budget reduction of €80 billion is to remain, but to maintain the overall level of cuts, this proposal included deeper reductions to EU funds for research, cross-border telecommunications, energy infrastructure, and overseas spending.
- €5 billion is to be cut from part of the budget covering the EU’s activities beyond its borders.
- Other areas covering migration and emergency services, as well as other security and citizenship issues will be subject to a smaller cut of €1.6 billion under this proposal.
- Infrastructure projects to be reduced by €5 billion.
- Some areas are to be allowed increased funding, such as agricultural spending and subsidies. €8 billion was restored to these, largely due to efforts from France.
- Furthermore, regional development aid is to be increased by over €10 billion from the first proposal.
- The text on EU administrative spending remains unchanged from the first draft, as does the text on rebates, possibly due to efforts to change how the budget is financed overall. This is controversial and will remain an issue for some Member States.
Possible Effect on Ireland
Although negotiations remain on-going, it is difficult to predict their outcome. However, two issues of importance for Ireland are CAP and cohesion policy negotiations. Under the Council’s second proposal, both of these remain reduced, although to a lesser extent than they were originally.
The pressure to deliver a deal on the MFF will now shift to 2013 and there will be sustained focus on the Irish Presidency of the Council of the European Union to deliver an agreement. Undoubtedly, it will constitute a significant challenge for the Presidency, but it will also provide an excellent opportunity for the Government and its efforts to further repair Ireland’s reputation internationally.
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