The European Union budget. When the CAP doesn’t fit

Date: 10/12/05

Tony Blair has ducked the challenge of reforming the European Union's finances

ONE of the odder features of the European Union is its six-monthly rotating presidency. This puts pressure on whichever political leader happens to be in the chair not merely to preside efficiently, but also to notch up a string of "achievements". That explains why Britain's Tony Blair, whose current EU presidency culminates in a summit in Brussels on December 15th and 16th, has spent the past week flailing around Europe in a desperate quest for a deal, any deal, on the EU budget for 2007-13.

In June, when Mr Blair rejected a compromise put forward by the previous Luxembourg EU presidency, he set out some sensible parameters for future negotiations. After the rejection of the EU constitution by French and Dutch voters, the Union was crying out for reform. Mr Blair spoke of modernisation, a "reality check" and a "wake-up call"; he noted that a modern EU budget would not be one that spent 40% of its money on the common agricultural policy (CAP); and he repeated that he would put the British rebate, won by Margaret Thatcher in 1984, on the table provided there was more CAP reform.

The British presidency finally put forward its own proposal for a budget compromise on December 5th. Set against the ambitions Mr Blair laid out in June, it is striking mainly for its timidity. At French insistence, the plan leaves the CAP untouched until 2013: indeed, it raises its share of the budget to 44%. Far from boosting EU spending on research and innovation, the British compromise cuts it sharply. Despite getting so little on the CAP, Mr Blair's proposal makes significant cuts in the British rebate, albeit smaller than those suggested by Luxembourg in June. And to make the numbers add up, he suggests trimming regional aid to new EU members from central Europe by 10%, a plan fully meriting the European Commission's jibe about a new "sheriff of Nottingham" who takes from the poor to give to the rich.

Predictably, Mr Blair's compromise has run into a storm of opposition around Europe. The commission said it was a budget for a "mini-Europe"; several countries called for new proposals, which the British have now promised. In fact, the original plan is tactically astute. By cutting the size of the budget, it appeals to big net payers, such as the Germans and the Dutch. Leaving the CAP intact ought to please the French, who remain atavistically attached to farm subsidies (see pages 27-29). Even the central Europeans, though angry about their budgeted assistance being cut, might sign up, partly because Mr Blair proposes to ease the conditions they have to meet to get their money, and partly because they fear that further delay could cost them even more. Next week's summit promises much noisy fist-banging, and Mr Blair may have to put more of the British rebate on the table - but a deal could be done.

Strategically, however, the British budget compromise is already a failure. It does nothing to shift spending from a backward-looking emphasis on farming and regional transfers to more forward-looking support for industries of the future. Although more CAP reforms will surely be required by world trade negotiations, this plan makes no move towards them. The French president, Jacques Chirac, insists that the deal struck in October 2002, endorsed by all EU leaders, to keep CAP spending unchanged until 2013, must be respected. Not for the first time, Mr Blair must be kicking himself for ever accepting that deal - and wondering if he, and his successors, really will have to wait until 2013 before reopening it.

Editorial says that the UK EU Presidency has ducked the challenge of reforming the EU budget.

• Primary Source