Move to achieve ‘zero’ budget

Date: 18/07/1996

By Rory Watson

MEMBER states are preparing to cut an unprecedented 2 billion ecu off EU farm and regional spending next year in a bid to meet the tough Maastricht criteria for economic and monetary union.

The move is being led by Germany and France, but is supported by at least half of the Union's 15 member states as they try to bring their public finances under control and satisfy the requirements for membership of the single currency block in January 1999.

“Union governments are basically looking to hold EU spending to the previous year's levels. We are talking of a 'zero budget',” said one EU diplomat.

To achieve that target, budget ministers will be looking to trim at least 2.5 billion ecu off the European Commission's already restrictive 90-billion-ecu draft budget.

German concern over the cost of its EU membership was highlighted this week when Finance Minister Theo Waigel said his country was bearing too much of the Union's financial burden and he would urge member states to cap spending in 1997.

“We are seeking a strict restriction on spending in the 1997 budget. The EU must fully support the efforts of member states to consolidate their budgets,” he insisted.

Environmental and consumer projects are likely to be key casualties of the financial strait-jacket to be imposed on the EU budget when ministers meet next Thursday (25 July).

In their opening salvo, governments are preparing to delete completely any Union financial help to 'green' non-governmental organisations (NGOs) and for environmental projects in cities.

Projected funds for consumer programmes are also threatened, with member states looking to whittle down the Commission's projected expenditure from 19.1 million ecu to just 9.1 million ecu.

“We are going for well-targeted reductions in internal and external policy areas. There is a belief that these areas should also take a share of the pain and that for the budgetary package to be generally acceptable, there should be rigour all round,” said one official.

Supporters of the cuts argue they are justified on the grounds that the Union has no legal base for such spending, despite the fact that 7.5 million ecu is being given to NGOs and 2 million ecu to urban projects this year.

Although Germany and France are leading the campaign for spending cuts, they are strongly supported by the UK, Netherlands, Spain, Austria, Sweden and Finland.

“The unexpectedly tough line governments are taking is partly prompted by concerns to meet the convergence criteria and by the cuts in public spending they are implementing at home. Politically, it is difficult to justify increased EU expenditure in that climate,” explained one official.

Governments will also point to the Commission's tendency in the past to overestimate projected Union spending as an argument for wielding the budgetary knife.

As the Union begins work on a projected 90-billion-ecu budget for 1997, it is preparing to hand back to member states 9 billion ecu in funds which remain unspent from last year.

Half of that amount stems from overestimates on farm spending. In addition, delays in implementing regional and social programmes mean that almost 20 billion ecu of structural funds made available since 1989 remain unspent. The poor take-up is especially marked in northern member states, who are reluctant to increase public expenditure by providing the necessary matching funds to complement the EU finance.

Although the determination to cut farm spending reflects a long-overdue attempt by finance ministers to control the spending habits of their agriculture colleagues, there are signs that 1997 might be the wrong year to tighten the budgetary reins. After considerable underspending in recent years, the impact of the BSE crisis on the beef industry could reduce the scope for savings in the planned 42-billion-ecu farm budget.

Whether governments are successful in keeping down next year's expenditure will depend to a large extent on the European Parliament. MEPs share budgetary powers with member states and have, in the past, traditionally reinstated the funds for all policy areas - except agriculture - removed by the Council of Ministers.

Dutch Liberal MEP Laurens Brinkhorst, preparing the Parliament's budgetary strategy, believes that his colleagues will adopt a different approach this year.

“We should end the whole hypocrisy. We are busy analysing specific areas. In some, we do not want the cuts to bite too deeply. But it is clear that in some cases the Commission and the Council must take responsibility for the cuts and we should not allow ourselves to be blamed for their decisions,” he said.