Poland fights to the wire for extra cash

Date: 12/12/02

By David Cronin

EUROPEAN reconciliation shouldn't be done on the cheap.

That sums up why Danuta Hübner, Poland's European affairs minister, believes her country's plea for extra cash should be taken seriously.

Hübner describes the EU's expansion into territory that used to lie behind the Iron Curtain as "the most important event after the [Second World] war." And she desperately wants to avoid a situation where the goal of concluding talks on admitting ten new states to the Union at Copenhagen could prove elusive due to bickering over money.

"So far the European Union - with all its enlargement to the north and south - still remains a club of developed market economies," she says. "This will be the first time it will not just be a club for the rich but a way of living in Europe, from a political, social and economic point of view."

As a member of government, however, Hübner has to temper her idealism with realpolitik. Whatever final package Poland is offered by the Union's existing members will be subject to fierce debate in the campaign leading to the referendum on EU accession next year.

Belgium's premier Guy Verhofstadt has remarked that enlargement without Poland would be inconceivable. With nearly 39 million people, it is the largest of the ten central and eastern European states bidding to enter the Union in 2004. However, Denmark's Foreign Minister Per-Stig Moller said this week that Poland risked being excluded from the EU if it sticks to its demands for further cash.

Leszek Miller's government would be foolish to bet too much on the prospect of the 2003 referendum being carried. Some opinion polls have indicated 70 of Poles support EU entry, but one published last week said around two-thirds felt their interests are not being defended stoutly enough in this final stage of negotiations.

Undertaking a tour of EU capitals in recent days, Miller has had two key demands.

These are a €1 billion "budgetary compensation" package, and an increase in permitted milk production quotas from the 9.5 million tonnes offered by the EU to 11 million tonnes.

With Germany, the Union's paymaster, leading opposition to these calls and no deal emerging before most summiteers had left for Copenhagen, the Polish demands look set to be subject to some of the toughest bargaining at the summit. Determined not to leave the Danish capital until he has secured the most favourable outcome, Miller has booked a hotel room for two nights longer than the summit's official schedule. (The Danish presidency is also taking no chances, having reserved the summit centre until Sunday).

While the EU-15 has agreed that new member states should be no worse off in 2004 than in 2003, no such guarantee has yet been made for subsequent years. Hübner is concerned that Poland could suffer hardship in 2005 and 2006 if it is required to make large contributions to the EU budget, while its farmers are still not receiving the same level of subsidies as those in the current member states.

Under a European Commission plan - much of which was endorsed by EU leaders at the Brussels summit in October - farmers in the Union's new countries will have to wait until 2013 to receive their full entitlement to direct payments under the Common Agricultural Policy. Not surprisingly, farm lobby groups have savaged the plan, arguing it breaches the principle of equal treatment. Some of the most acerbic complaints have come from Poland, where one-fifth of the population depends on agriculture to survive.

Poland has a clause in its constitution stating that the country's debt should not exceed 50 of national income - a threshhold which has already been hit. In a few years it will also be subject to the "convergence criteria" laid down in the Maastricht Treaty, which would place additional limits on public expenditure.

Hübner says she wants Copenhagen to clinch a deal which is "not dangerous for our budget".

"If we do not get support to the budget, then this could be a threat to macroeconomic stability. We expect there will be full understanding that support for the budgets of new member states is in our common interests.

"The upper limit on debt has already been reached.

"We can't increase the indebtedness of the country, so there's a danger we will have to raise taxes or decrease social expenditure. That would be difficult before a referendum."

She insists that it would be in the interest of the entire EU if Poland's calls to be treated more generously are heeded.

Larger milk quotas are needed, she feels, especially because of the high number of small-scale dairy farmers in the country.

"I hope that at Copenhagen we will go back to the major goal of the reunification of Europe. I also hope we will go back to the principles of solidarity and common interest and that we can look at a final package which reflects common interests."

She sounds a note of cautious optimism that her country's hard bargaining will bear fruit.

"I can't imagine that at the end of the day we will part and not come to an agreement because of several hundred millions of euro. That might be a major problem in the long run.

"If we end up talking about the hundreds of millions of euro that some want to save, then that might be a bad saving. We could lose billions of euro in the long term. We must be visionary and responsible."

Danuta Hübner, Poland's European affairs minister, believes her country's plea for extra cash should be taken seriously.