Dutch demand EU budget freeze in campaign to cut contributions

Date: 05/11/1998

By Tim Jones

THE Dutch government has called for an effective freeze on EU regional and agricultural spending as part of a campaign to cut its annual contributions to the Union's budget by 600 million ecu.

In a move which is sure to infuriate Spain in particular, the left-right coalition in The Hague published a position paper this week insisting that Union budgetary spending should only increase in line with inflation between 2000 and 2006.

This is in stark contrast to the European Commission's proposal in its Agenda 2000 reform package, which is designed to ready the Union for enlargement to the East, to increase spending in line with economic growth.

"This means the projected expenditure in the Commission's proposals for the Common Agricultural Policy and the structural funds, which together account for over 80% of annual expenditure, must be reduced," says the Dutch paper.

The Commission has proposed an increase in spending on agricultural subsidies from 45.2 billion ecu next year to 51.6 billion in 2006, including 3.6 billion ecu to prepare applicant countries for EU membership.

But the Dutch paper calls for farm spending to be kept within the 40.4-billion-ecu ceiling set out in the Union's 1998 budget and only increased in line with inflation up to the end of the review period in 2006.

Similarly, The Hague slams Commission plans to allocate 286 billion ecu for regional aid between 2000-06 as "unnecessary and undesirable" and urges a "substantial reduction".

Instead, it argues, the overall budget for structural funds and the special 'cohesion fund' for the EU's poorer member states should be capped at 200 billion ecu and index-linked until the end of 2006.

The paper claims that this is achievable through savings made in the regional aid budget as certain areas are removed from the beneficiaries list and as cohesion spending is slashed.

The Dutch proposal for cutting cohesion fund expenditure will spark fury in Spain and Portugal, which will be among the founder members of the single currency zone when it is launched in January.

"The Netherlands takes the view that EMU countries do not qualify for the cohesion fund," states the paper. "This fund is intended to prepare countries for participation in EMU. The fact that countries have qualified for EMU indicates that this convergence has taken place."

The Hague argues that savings resulting from keeping expenditure under tight control should be passed back to countries which are paying too much into Union coffers as a proportion of their gross domestic product.

The paper refers to the recent report from the Commission, which confirmed that the Netherlands is the largest per-capita net contributor to the EU budget.

"The Netherlands' net position will deteriorate significantly in the coming period unless there are changes to the implementation of Agenda 2000," claims the Dutch paper, arguing that large Union-funded export subsidies to foreign companies using the port of Rotterdam will dry up as CAP reform bites.

It warns that the only way to address the Netherlands' concerns is to extend the system of budget rebates applied to the British government since 1984 to all "excessive" contributors to the Union budget.