Spain defends its slice of the EU cake

Date: 15/01/1998

In the run-up to one of the most far-reaching reforms of Union funding, Miguel Mucientes explains why Madrid is leading the way in resisting any new financial framework that would mean the cohesion countries 'paying' for enlargement

SPAIN, as a principal beneficiary of the agreement which created the cohesion fund to help narrow the gap between the EU's richest and poorest member states, was widely acclaimed as the winner of the last 'poker game' for Union funds presided over by the UK.

But this time, the prospect of the British presidency makes Madrid wary and, in the run-up to one of the most far-reaching reforms in the EU's history, the Spanish government is playing its cards close to its chest.

Detailed proposals for the blueprint for a new financial framework for the period from 2000 to 2006 and the related reform of the Union's main policies - from regional to agricultural spending - will be published by the European Commission soon, putting flesh on the bones of its Agenda 2000 report.

But Spain has already indicated that no agreement can be reached until all the pieces of this very complicated puzzle are on the table - probably not before 1999.

This is bad news for the British presidency, which is apparently keen to get EU leaders to approve an interim report on progress towards reform at the Cardiff summit in June. Madrid's negotiators have already made their position clear to the EU institutions and their Union counterparts, and senior Spanish diplomats insist their stance “will be the same on 30 June”, when the UK hands over the presidency to Austria, as it is today.

Sources at the Spanish permanent representation in Brussels go as far as to warn that “this agreement will only be closed at the 11th hour of the European summit hosted by Finland in December 1999”.

Spain's greatest objection to the Commission's outline for the EU's future financial framework is the proposal to freeze the budgetary ceiling at the 1999 level of 1.27&percent; of the Union's gross national product for the whole of the period between 2000 to 2006.

Madrid considers this unacceptable given that in the same seven-year period the EU is expected to extend to the East, enlarging to take in some of the ten eastern and central European candidates and Cyprus.

Spain is not alone in questioning the resource ceiling. The outgoing Luxembourg presidency noted in its report to December's EU summit that some member states considered the ceiling might be insufficient due to the “uncertain number of the countries that will take part in the first enlargement and in view of the needs if it is wanted to continue with Community policies with the same level of ambition, particularly the cohesion and the Common Agricultural Policy”.

In that report, the Spanish delegation “invited” the Commission to produce “an as exact as possible evaluation of the cost of the enlargement in the case of the entire adoption of the acquis by the future member states”.

The other cohesion countries - Greece, Portugal and Ireland - have been happy to let Madrid take the lead in making their case. But all four reject the idea that the EU's poorest member states should end up paying for enlargement. This is a notion they regard as implicit in the structural expenditure proposals in Agenda 2000 that “financing for structure operations, including those for the new member states would be maintained, in relative terms, at the 1999 level, namely 0.46&percent; of the Union's GNP”.

They also complain that the allocation made by Agenda 2000 for the existing 15 EU member states between 2000 and 2006 of 210 billion ecu for the structural funds and 20 billion ecu for the cohesion fund is insufficient.

The Commission argues that the 210-billion-ecu figure, divided over seven years, is more than the average annual figure for five preceding years. But the Spanish insist the sums should be based on the funds allocated in 1999, the year when the cohesion effort reaches what Madrid describes as “cruising speed”.

On this calculation, says Spain, the 210 billion ecu falls short of what is required.

The resolve of Spanish negotiators to block all decisions affecting the future financial framework, as they have threatened, has already been tested with other agreements which require unanimity - such as the Fifth Framework Programme for Research and Development and the maintenance of the agriculture spending guideline - and has so far held strong.

For the moment, Madrid is awaiting the Commission's detailed proposals for reform of the structural funds. The institution has already suggested reducing the seven objectives for structural funding which currently exist to just three: Objective 1 for underdeveloped regions; Objective 2 for regions in industrial decline, which will for the first time include rural areas, urban areas with particularly heavy unemployment or programmes to combat social exclusion; and Objective 3 to provide help for training and better education for the labour force in regions not covered by the first two.

The Spanish concern is not so much the strict application of the criteria for awarding Objective 1 status (GNP per capita of less than 75&percent; of the EU average ), since only two regions - Valencia and Cantabria - would then lose their Objective 1 status, as the suggestion that funds allocated from the cohesion fund be reduced.

The argument doing the rounds in Germany and other big EU member states is that if any of the four cohesion countries makes it to the first wave of monetary union, as Spain is expected to do, there is no sense in their continuing to be covered by the fund. They argue that qualifying for entry into monetary union will be proof enough that the country in question has already achieved what the cohesion fund was created to ensure - convergence.

Such reasoning wins no support in Madrid. For Spain, the need to support real economic convergence and not just nominal economic convergence is enshrined in the EU treaty - the only condition being respect for the sound budgetary policies specified in the new euro 'stability pact' and, for the country as a whole, a GNP of less than 90&percent; of the EU average as the cohesion fund regulations currently require.

It is crucial to this calculation, argue the Spanish, that the statistical base remains the same and that the economies of the EU enlargement candidates should not be allowed to impact negatively on the figures, distorting the Union's average wealth level.

Agricultural policy is also a major bugbear, specifically in relation to the common market organisation for wine, tobacco and olive oil, where the forces of opposition are already marshalled against a Commission proposal to replace production aids with direct income support based on the number of trees.

Discussion of these regimes is planned as part of the UK presidency's determination to tackle the issue of CAP reform but, given the Spanish position, the debate is unlikely to make much headway.

“We cannot close deals on partial subjects without balancing them in a global package,” insisted one Spanish diplomat.

Yet Spain is not the only member state with the potential to upset Commission and presidency timetables.

There is no Spanish design in the October date for the German general election, nor in the fact that the Commission - coincidentally - has decided to wait until the autumn to present a report on the collection of budgetary resources, a system Germany wants to “correct” to reduce its net contribution to EU coffers.

Any discussion of the so-called Fontainebleau decision, which established the principle of the British rebate, will also complicate the political forces at work in the run-up to enlargement.

Madrid is opposed to the British rebate, to which it never specifically agreed since Spain was not an EU member when the deal was struck. Should this discussion be reopened, Madrid has powerful political reasons to insist that EU financing should not be renegotiated in terms of net benefits.

“It is a fallacy to discuss budgetary resources on the basis of net balances. How can you measure the return that is the result of market liberalisation due to the single market, or the liberalisation of telecommunications?” said one Madrid government source.

As Spain's net gains from EU membership amounted, according to its own calculations, to 7.2 billion ecu in 1995 (the last year for which figures are available), Madrid has every reason to play a defensive game.