Commission budget chief: cash cap saps job creation

By Dana Spinant

Date: 20/01/05

The EU will pay for farms rather than improve its economic competitivity, if six member states prevail in their aim of limiting the Union's budget, the European Commission's budget chief is warning.

Dalia Grybauskaité, the commissioner for the budget, said that the six countries demanding that the EU budget be capped at 1% of the Union's gross national income were in effect proposing a significant cut in the EU's budget.

"1% is in real terms a reduction of the EU budget, for a Union which is 25% larger, with 25% more inhabitants and facing new challenges to become more competitive and to achieve sustainable growth," she told European Voice. "There would be a reduction of €9 billion in 2007, the first year of the new financial perspectives, in comparison to 2006," she added. "So all the priorities would have to be revised. It is not for the Commission to do that, it is for member states to decide. They must take political responsibility for what Europe they want to see."

Noting that almost half of the Union's budget was predetermined, because the amount of agricultural spending had been decided by a deal between EU leaders in 2002, Grybauskaité pointed out that it would be those parts of the budget that promoted competitiveness that would be affected by cuts. "If competitiveness is affected, all member states and their ability to have sustainable growth will be affected. Who will take political responsibility to say that Europe has ambitions to create growth but does not pay for them, it pays for agriculture?"

She described farm spending, which currently accounts for 40% of the budget, as an area "far from competitiveness, only pretending to be competitive, except maybe for the rural development programmes, which introduced competitiveness in agriculture". But she estimates the rest of the budget proposed by the Commission is oriented towards achieving competitiveness, as "the financial resources for R&D and TENS [trans-European networks] increase three to four times. This is very positive".

But Grybauskaité warned that "nobody should have any illusion" about who is going to lose if the budget is cut. "Everybody will suffer, all member states, all sectors. Just an example: if the cohesion policy suffers, all member states will feel it - the eastern länder in Germany will lose money, Austria's regions bordering Hungary, etc."

The Lithuanian commissioner pointed out that the member states had already put many proposals on the table that they want to be supported by EU money, "the Lisbon Agenda, education, life-long learning, TENS", but they were now hesitating on the finances. "This is a clear contradiction," she said.

On one of the main sticking points of the negotiations on budget, the rebate that the UK has enjoyed since 1984, Grybauskaité said some form of reform of this controversial rebate would remain in the final deal. "I think it will remain in the package, in one form or another. We need to modernise the correction mechanism, to diminish the imbalances between net payers."

Grybauskaité said she hoped that the difficult negotiations on the financial perspectives would make member states see the advantage of having an EU tax to finance the Union's budget. "A tax-based system would be easier to manage, closer to citizens and more transparent."

It would give EU institutions more powers, which was, she suggested, why member states rejected the idea during negotiations on the EU constitution.

"I doubt we can talk about an EU tax in the near future. It's for member states to see how much they struggle [to reach agreement] on the financial perspectives and that it would be easier to have an EU tax. That has to grow in their mind, they have to realise that.

"But in a longer term perspective, one can think of an EU tax."

Dalia Grybauskaité, European Commissioner for the Budget, said that the six countries demanding that the EU budget be capped at 1% of the Union's gross national income were in effect proposing a significant cut in the EU's budget which could endanger the EU's aim to improve its competitiveness.