Forecasts peg EU budget in bid to put minds at rest

Date: 17/07/1997

THE budgetary framework established by the Union five years ago will be sufficient to cover the costs of enlargement and all EU policies until 2006, according to the Commission's latest forecasts.

Its proposal for a roll-over of the existing financing arrangements when they expire at the end of 1999 is designed to reassure the public and member states that the entry of new countries will not cause existing members undue financial hardship. It will also remove the need for national parliaments to approve any increase in EU financing.

The Commission's suggestion that the existing ceiling on the Union budget of 1x27&percent; of gross national product be maintained reflects its belief that this will provide enough funds to meet the major challenges of Common Agricultural Policy reform, helping the Union's less developed areas and carrying out internal and external policies.

It is also intended to supply funding to prepare the applicants for membership and cover the first wave of enlargement. The Commission reasons that this can be achieved through a combination of CAP savings, greater concentration of aid, the prospect of economic growth and careful financial husbandry. It suggests economic growth alone could yield an extra 20 billion ecu a year to the EU budget by 2006 and that actual expenditure could increase by 17&percent; from this year's level.

Under the Agenda 2000 plans, spending on regional and social programmes would reach 275 billion ecu between 2000 and 2006, with the lion's share (230 billion ecu) going to existing member states and the rest allocated to the applicants.

Given the high political priority now attached to increasing European competitiveness and tackling unemployment, the Commission envisages spending on Trans-European Networks, research and development (R&D), education and training, the environment, and small and medium-sized companies rising faster than on other areas.

The Commission intends to present an extensive report next year assessing how the Union budget is operating. This will also outline its views on the mechanism used to reduce the UK's annual budgetary contribution and whether the EU should consider other ways of generating income.

But, despite pressure from major net contributors such as Germany and the Netherlands for a change in the current arrangements and underlying criticism of the UK's rebate, the Commission believes there is no case for early reforms.

Instead, it suggests an overall re-examination of the budget, including the possible introduction of a general system to create a better balance between member states' receipts and payments, should wait until there is political agreement to lift the 1x27&percent; ceiling on EU expenditure.