Battlelines drawn as talks on future funding get under way

Date: 21/05/1998

By Tim Jones

GOVERNMENTS are about to begin the first round of high-level bargaining over the European Commission's controversial plans to overhaul the system for financing Union policies.

EU foreign ministers will begin serious negotiations on the Agenda 2000 package, which aims to settle the vexed question of the Union's sources of funding from 2000 to 2006, at their meeting next Monday (25 May).

But a discussion document drawn up by the British presidency before the meeting, summarising the Commission's proposals and the early reactions of the EU's 15 governments to it, underlines just how difficult it will be to get agreement.

France and Germany are fiercely opposed to radical agricultural reforms, while the British and most others are sceptical about the changes to regional funding, Spain fears the Union's fiscal transfers to the southern member states are under attack and the Netherlands, Sweden and Austria are demanding a ceiling on net budgetary contributions.

Agenda 2000, which was unveiled by the Commission in March, proposes maintaining the ceiling on transfers to the Union's budget at 1.27&percent; of gross domestic product and capping spending at 1.13&percent; of GDP by the end of 2006.

However, the Commission also wants to set aside 45 billion ecu for regional aid and 500 million ecu every year for agricultural subsidies to countries aspiring to EU membership.

Under its plan, the cost of accession would be met by ending structural funding for several regions within existing EU member states, including Lisbon, the whole of Ireland and Valencia, and keeping total regional spending over the 2000-06 period to 275 billion ecu.

At the same time, support prices for cereals, beef and milk would be cut by 20&percent;, 30&percent; and 15&percent; respectively.

Although governments will not commit themselves to any part of the proposal until it is all agreed, the British paper shows that member states “broadly welcome” the approach of the Commission in separating the pre-accession spending from the rest of the package.

The document also refers to the independent proposal, which the Commission will publish in the autumn, regarding 'own resources': the funds which come into the EU coffers from farm levies and customs duties on goods imported to the Union, value added tax and a financial contribution calculated on the absolute size of gross domestic product.

Reform of this side of the equation is the number one priority for the Germans and the Dutch.

Indeed, when Agenda 2000 was released in March without touching on this issue, German Finance Minister Theo Waigel accused the Commission of burying its head in the sand.

“We think budgetary discipline is a very important element of the new financial framework,” said a German official. “That means maintaining broad margins under the ceiling and we have kept a general reserve on all the amounts until we have full agreement on the package.”

Once foreign ministers have run through their arguments, the proposals will be sent back to ambassadors and the 'friends of the presidency' group of budgetary officials at member states' permanent representations.

Both aim to have preliminary conclusions ready for the 15-16 June summit in Cardiff.

However, negotiations on the details are likely to continue for more than a year, making a final deal unlikely before the end of 1999.