Germany leads crusade to shift budget burden

Date: 11/09/1997

By Rory Watson

THE EU is set to split into two rival camps as member states argue over ways to readjust the burden of financing the EU's annual 90 billion ecu expenditure.

Germany has taken the lead in an aggressive campaign to overhaul the present arrangements, arguing that the growing gap between its payments to, and receipts from, the Union budget is becoming intolerable.

"It is clear that simply to carry on as we are cannot be the solution, even if net payments are only of limited meaning on their own. There is clearly a lack of justice," insisted German Foreign Minister Klaus Kinkel.

Bonn raised its complaints at a meeting of EU ambassadors in Brussels this week, with Kinkel expected to repeat them with even greater vigour when foreign ministers meet next Monday (15 September) to give their first substantive reaction to the European Commission's 'Agenda 2000' programme for the Union's future.

Bonn's demands are supported by the Netherlands, which - largely because of the customs duties collected at Rotterdam on EU imports - is one of the highest per capita contributors towards the cost of Union policies. French European Affairs Minister Pierre Moscovici has also indicated his government would be prepared to reassess the existing system.

But any suggestion that the complex budgetary equation should be rebalanced is fiercely opposed by member states such as Spain and Portugal, which are major beneficiaries. They argue that the financial transfers from richer to poorer countries are an essential element of the EU's objective of achieving greater economic and social cohesion.

As the opening shots in the budgetary war are fired, UK Foreign Secretary Robin Cook warned this week that his government would not tolerate having to pay more towards the Union in order to reduce Germany's contributions.

Aware of the heated political arguments inevitably sparked off by any attempt to divide member states into winners or losers in the EU budgetary stakes, the Commission deliberately tried to avoid opening up the debate as it assessed the Union's future up to the early years of the next century. The Agenda 2000 programme published in July argued that the current situation did "not suggest the existence of a strong case for a rapid modification of the present arrangements".

Yesterday (10 September) Commission President Jacques Santer went out of his way to warn that acrimonious discussions on budgetary reform at this stage of the Agenda 2000 negotiations could lead to deadlock and derail enlargement and the necessary policy reforms.

That message has so far not been heeded by Bonn. While acknowledging that, as the EU's biggest economic force, Germany should be the major net budgetary contributor, Kinkel warned last week that the anomalies had now become too great.

In 1987, Germany's net contributions were some 4 billion ecu. By 1995 they had reached 11.5 billion ecu. The UK's net payments two years ago were 8 billion ecu, France's 600 million ecu and Italy's 200 million ecu.

The per capita league table of member states' payments to the EU budget may well change when new figures are produced later this year. These will reveal that, per head of population, Luxembourg pays 400 ecu per person and Germany 250 ecu.