Will the Berlin budget add up for accession states in Copenhagen?

Date: 02/05/02

The enlargement finish line may be insight, but the serious haggling has barely begun for the countries vying to join the EU, writes Dick Leonard.

IT WAS nine years ago next month that, at a summit in Copenhagen, the EU heads of state and government set out the conditions under which membership applications from the former communist states of east and central Europe (as well as Malta and Cyprus) would be acceptable.

Next December - also in Copenhagen - they hope formally to agree on the admission on 1 January 2004 of no fewer than ten new members. So what are the chances of this once seemingly improbable conclusion being reached?

Günter Verheugen, the Commissioner for enlargement, gave a bullish report to a packed conference held in Brussels last week by Forum Europe.

The negotiations are dead on schedule, he said, having speeded up under the Spanish presidency. There are now only two chapters out of 30 - agriculture and the budget - on which provisional agreement has not been reached by some member states.

Cyprus is again leading the field with 27 completed chapters, closely followed by Lithuania and Slovenia, on 26, with only Malta (21) significantly behind. Bulgaria (17) and Romania (11) are out of the race, with 2007 now pencilled in as their likely date for admission.

These figures make it sound as if the bulk of the bargaining with the ten leading candidates is over, and that the negotiations are well into the endgame.

The truth, however, is that, for most of the countries, the serious haggling is only just beginning on the trickiest chapters - those concerning hard cash - such as agriculture, regional policy and the budget. The final bargaining position of the EU is likely to be determined next month - at or before the Seville summit on 21-22 June.

Up until now the main preoccupation of the EU negotiators has been to ensure that neither the agricultural nor the regional chapters will impose a crushing burden on Union funds. They have therefore tabled two proposals whose effect would be to sharply limit additional expenditure, at least in the short term.

On agriculture, the basic proposal is that direct payments to farmers in Poland and the other new entrants should be restricted in 2004 to 25 of those paid in the existing member states, rising in gradual stages until 2013, when full equality will be reached.

Well before then, it is hoped, the Common Agricultural Policy will have been fundamentally modified.

On regional policy the expenditure would be limited by a new rule that no country will be entitled to receive regional aid in excess of 4 of its GDP. The practical effect of this would be that per capita regional fund payments would be at not much more than 50 of the level currently being paid in the EU's less wealthy regions.

The reaction in most of the candidate countries to these proposals has been one of dismay. Their prospects of securing significantly more generous terms, however, do not appear good, although the Commission is apparently hoping to persuade the Council of Ministers to add a few 'sweeteners' and, in particular, to ensure that none of the candidates should become net contributors to the EU budget in the early years.

The EU's parsimony is supposedly a consequence of the decisions taken at the Berlin summit in 1999, which set overall spending limits for the years 2000-2006, allocating a maximum of €67bn to spending on the new member states. This is just over 10 of the EU's budget, or one-tenth of 1 of the combined GDP of the 15 member states.

It compares with €600bn transferred to East Germany in the nine years after reunification.

Endre Juhász, the very able Hungarian chief negotiator, has made some highly relevant criticisms of the EU's stance. Speaking last month to the budget committee of the European Parliament, he pointed out that the Berlin financial commitment was made on the basis of six new member states.

Now that ten members are expected, the figure should be increased, he argued, by around

30, to take account of the higher population involved.

Such an adjustment would result in an increase of €8.5bn in additional resources for enlargement in 2004-6, plus an extra €15.5bn unspent from earlier years. This addition of €24bn, which would come well within the overall spending limits agreed at Berlin, would go a long way to meet the objections of the applicant states.

If the EU was prepared to loosen its purse strings to this extent, it would virtually ensure a successful end to the negotiations. Yet there are other obstacles still to overcome which could still derail, or at least delay, the whole process.

The most obvious is the projected second Irish referendum on the Nice Treaty, which set out the institutional basis for enlargement.

This is now expected in October, and a negative vote could have disastrous consequences. Another horrendous prospect would be the failure of the current UN-sponsored talks on a Cypriot settlement, which could spark a Greek veto of all the other applications if it was not agreed to admit a still-divided Cyprus.

All the candidate states (though, perhaps fortunately, none of the existing members) are committed to holding referenda before joining.

In several of them there have been periodic wobbles in opinion polls in the past, but the latest survey by Eurobarometer yields strong majorities in every country except Malta, where the opposition Labour Party is opposed to membership, and the margin in favour is only 6. Another survey - published on Monday by Eurochambres, the European confederation of chambers of commerce - found overwhelming support from the business sector in the candidate countries, with 93 of the 2,575 companies sampled in favour of membership.

So, with the possible exception of Malta, the chances of any of the current candidates following the Norwegian example of turning down a negotiated deal appear remote. There is everything to play for during the coming six months of negotiations, and despite the obstacles already mentioned, the prospects are looking pretty good.

A feature on the timetable for EU enlargement following a speech by European Commissioner for enlargement, Günter Verheugen, at a conference hosted by Forum Europe in Brussels on 25 April 2002.