Presidency bids to thwart last-minute budget brinkmanship

By Stewart Fleming

Date: 14/10/04

DUTCH Finance Minister Gerrit Zalm's resolve to push forward the debate about the EU budget during the Netherlands' presidency will be taken a step further next week when finance ministers discuss the 2007-13 spending plans at the Ecofin Council (21 October).

Zalm, it is said, takes the view that after 25 years of experience with the Dutch budget, he is ready to press his colleagues not to leave the debate to be resolved in a flurry of last-minute crisis meetings in 2006.

Some of the issues were already broached at this week's (11-12 October) meeting of foreign ministers in Luxembourg, where the financial perspectives were on the agenda. Officials confess that the Dutch approach is stirring up controversy.

Six of the net contributors to the EU budget threw down their marker in the debate earlier this year when they said that the 2007-13 budget should not exceed 1% of EU gross national income (GNI), significantly below the 1.24% which is the current limit. The European Commission has proposed spending which is equivalent to an average of 1.14% over the seven years.

The bid of France, Germany, the UK, Sweden, Austria and the Netherlands to limit the budget to 1% of GNI is seen as more than simply an opening negotiating stance. The governments concerned are determined to force the EU to re-assess priorities and to re-allocate EU resources by shifting funds between different chapters, cutting some and increasing others. "We want to avoid a negotiation which boils down to settling on some compromise figure between 1% and 1.24%," says an official from one of the six states.

The Dutch have initiated a so-called building blocks approach aimed at fleshing out where countries and groups of countries stand on individual spending chapters. According to one official, at this stage it is too early in this process to put actual price tags on specific spending items.

Even so, says another, some countries are already not too happy about it. "They are being asked to clarify their positions on specific issues at a very early stage," he says.

The six argue that underlying economic growth, EU enlargement and savings as a result of reforms to the common agricultural policy mean that a 1% cap is not too restrictive at a time when national budgets are under pressure and money scarce. Farm spending could come down to 36% of the EU budget by 2013, they say.

In the firing line in the reallocation of spending priorities is regional aid. Sweden is arguing that EU regional aid should no longer be given to poor regions of rich member states.

Instead, while bearing in mind economic evidence that they can only absorb a maximum of 4% of GNI, support should be focused on the new, poorer, EU members.

It is unlikely that the EU member states can agree swiftly on the next financial perspectives.

One EU diplomat points out that, with an election expected in the Spring of next year and then a possible vote on the EU constitution in 2006, Britain has good reasons for delaying any decisions that might have an impact on its budget rebate.

Officials are already trying to find a date in 2006 for an emergency summit at which a final agreement could be nailed down.

• Stewart Fleming is a freelance journalist in Brussels.

Preview of the Ecofin Council on 21 October 2004 where EU Finance Ministers were to discuss the 2007-13 spending plans.