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'Inward-Looking' EU Kicks Off Complex Budget Talks

An employee at the EU council in Brussels on November 22 adjusts European Union flags at the entrance of the council headquarters for an EU leaders' summit discussing the bloc's long-term budget.
An employee at the EU council in Brussels on November 22 adjusts European Union flags at the entrance of the council headquarters for an EU leaders' summit discussing the bloc's long-term budget.

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EU: Troubling Signs Amid Budget Talks

A brief initial round of summit talks ended early without any reported breakthrough.
By Rikard Jozwiak
BRUSSELS -- European Union prime ministers are in Brussels for a fight that's set to last all weekend -- and probably well beyond.

It is the 1 trillion-euro EU budget for the next seven years that needs to be settled and, as always, there are sharp contrasts between different member states. The budget will determine the outlook of the EU in coming years and it is likely that a more inward-looking EU will emerge from the bruising fight.

What's at stake during the summit?

What and how much the EU should spend in 2014-20. The European Commission's budget proposal totals 1.033 billion euros ($1.329 billion), of which 85 percent will come from EU member states, mainly through fees paid based on their Gross National Incomes (GNI). Four-fifths of the budget will go toward the EU's Common Agricultural Policy (CAP) and its Cohesion Policy, which funds projects in poorer parts of the union. But negotiating the details is already causing acrimony.

"The overall budget is 1 percent of the overall EU economy, so now we are fighting about a small portion of that 1 percent. So in the end we are not talking about a huge amount of money," says Janis Emmanouilidis of the European Policy Center. "But it is important because it is also political bargaining which is happening. Member states' governments want to go back and tell their home audiences that we fought for our interest and in the end we were able to get a compromise which suits our purpose."

If they fail to agree by the end of the year, many of the EU's long-term projects, especially in Central and Eastern Europe, might be disrupted.

So who wants what?

Support for the budget is divided among two groups: One, known as "The Friends of Cohesion," brings together countries that tend to receive more from the budget than they pay in. It wants to either keep or increase current spending. The other group, "The Friends of Better Spending," includes many net contributors to the EU budget and favors cuts. But even within the latter group there are varying positions. "Purist" members like the United Kingdom and Sweden want to shave 200 billion euros from the current commission proposal, which Germany feels is too high. France is also for cuts but wants to ring-fence agricultural spending -- a wish shared by the "Friends of Cohesion" group including Poland but also Greece and Portugal, who want to keep the budget inflated to resuscitate their economies.

Then there are countries from both groups -- like Estonia, Latvia, and Denmark -- that want the budget to focus more on innovation and science.

As if that wasn't enough, you have the EU institutions that are firmly on the side of the "Friends of Cohesion," as EU Commission President Jose Manuel Barroso recently put it.

"The most important instrument we have at the European level for investment in growth is the budget," Barroso said. "So let's now see if the governments that are always saying that growth is critically important are ready to come to a compromise on the most important instrument for investment in growth we have at the European level."

What's likely to happen?

There is every chance that a deal won't be reached, with many countries already threatening to veto if they don't get their way. Herman Van Rompuy, the president of the European Council, has circulated a draft proposal with 75 billion euros in cuts to the EU Commission -- 30 billion euros of which is split evenly between agricultural spending and cohesion policy. In the end, a lot will depend on British Prime Minister David Cameron. He faces pressure from London, where his own Conservative Party and the opposition expect him to stand firm, but also in Brussels from many member states who balk at severe cuts to the budget.

"I am not happy at all," Cameron told journalists as he headed into the November 22 meeting. "These are very important negotiations. Clearly, at a time when we're making difficult decisions at home over public spending, it would be quite wrong, it is quite wrong for there to be proposals for this increased spending in the EU. So we're going to be negotiating very hard for a good deal for Britain's taxpayers and for Europe's taxpayers."

To sweeten the deal for Britain, its own budget rebate will probably remain intact. It means London might get close to 4 billion euros back from the EU budget because the country receives such a small amount of agricultural subsidies from Brussels anyway.

How will the EU's foreign policy be affected?

Foreign policy will get a tranche of about 70 billion euros for the next seven years, according to the proposals. This is about 15 billion euros more than the previous budget but smaller in real terms (once inflation is taken into account). And with the EU wanting to play a bigger role in the world, for some it is a disappointing number.

Bendedicta Marzinotto of the Brussels-based Bruegel think tank says the reason is clear: the eurozone's economic crisis.

"I think it is not hard to understand politically why this is happening," Marzinotto said. "It is because the crisis has made Europe much more inward-looking than it was before."
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by: Eugenio from: Vienna
November 23, 2012 08:59
Well, these budget talks are of course only a Kleinigkeit in comparison to other issues that are haunting the EU decision-makers theses days.
The most pressing issue is, of course, the same one: GREECE and what to do with its unpayable sovereign debt. Just to remind you, as the whole Greek debt crisis started back in late 2009, the European Commission and the Central Bank have been predicting that from the then existing level of some 130 % of the Greek GDP, the sovereign debt of the country was supposed to go all the way down to 120 % (seriously :-) by the year 2020 (!!!).
And now after THREE YEARS of "combatting" the crisis and "saving" the Greek economy, one has the following situation:
(a) between 2008 and 2012 the Greek economy shrank by about 20 % (i.e., Greece lost about one fifth of what it had four years ago); the current projection of the European Commission is that the economy of the country will shrink by another 4 % in 2013;
(b) the unemployment level in Greece has in the meantime reached some 25 % of the population;
(c) and, finally, the sovereign debt of the country is NOW projected to reach some 188 % (!!!) of its GDP by the end of the next fiscal year.
Nice, isn't it, finding oneself in this situation after having spent 30 years in the EU and after having been "saved" by Frau Merkel and her friends over the last three years :-)).
ANOTHER INTERESTING ISSUE in the EU are the elections in Catalunya that will take place this coming Sunday. The current govt of this Spanish region plans - in the case if it wins the election - to start a process of splitting away from Spain. Spanish media is full of stories on this issue. And actually, given that the RFE/RL published earlier this year this memorable article on the SCOTTISH independence referendum (scheduled for 2014), maybe it would even make sense publishing a similar informative article on what is happening in Catalunya already today.

by: Eugenio from: Vienna
November 23, 2012 11:06
And it has just been announced that CYPRUS will become the FIFTH (out of 27!) EU member state that will have to surrend yet more of its sovereignty to the Germans in order to be "saved" from a looking default on its sovereign debt.
See, this country joined the EU only 8 years ago - and what the European Commission promised back then was actually that they were going to "help Cyprus solve its problem of separation of the Northen and Southern parts of the country". 8 years have elapsed since then - and the problem of separation was obviously not solved, and on the top of it now the Southern part will become a German colony.
Nice, thank you, Europe, thank you, Frau Merkel!
Source: http://economia.elpais.com/economia/2012/11/22/actualidad/1353614593_594161.html

by: Eugenio from: Vienna
November 23, 2012 15:49
VIDEO: Armed Austerity? Cash-strapped EU beefs up military - http://www.youtube.com/watch?v=emERorcU318&feature=youtube_gdata_player

by: Eugenio from: Vienna
November 25, 2012 09:24
More news on the EU: VIDEO - Catalonia anger blooms, Spain break up looms: http://www.youtube.com/watch?v=KpHZPVGsPM4&feature=youtube_gdata_player

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