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EU: Budget Process A Bruising Fight For Money

The European Union's internal negotiations on a new budget for the period 2007 to 2013 are moving into high gear. This follows a warning from the European Commission in Brussels that the process must be decided by June if programs are to be funded on schedule. This will be the first long-term budget adopted since the EU expanded by 10 new members last year. Competition for the hundreds of millions of euros in funding is fierce.

Prague, 13 April 2005 (RFE/RL) -- The overall size of the next long-term budget for the enlarged European Union is just one of many points of contention between the EU member states.

The European Commission, the executive arm of the union, has proposed a budget of some 930 billion euros ($1.2 trillion for the six-year period starting in 2007.

Budgetary Commissioner Dalia Grybauskaite said a budget of that size, representing 1.14 percent of the EU's gross national income (GNI), is needed to support the EU's ambitious aims. These include raising the living standards of new members, making Europe more competitive in the high-tech sphere, developing a common foreign policy, and other projects.

But a key group of six members -- heavyweights France, Germany, and Great Britain, plus the Netherlands, Sweden, and Austria -- all of which are net contributors, want a budget ceiling of 1 percent of GNI imposed.

That may not sound like a big difference, but in fact it is more than 10 percent of the budget, and therefore represents many billions of euros. And this at a time when the EU is facing major expenses with the new mainly Central and Eastern European members, who are likely soon to include Romania and Bulgaria.

Analyst Guillaume Durant of the European Policy Center in Brussels calls this stand by the "club of six" disappointing. Durant says Britain at least is being consistent, in that it has always opposed giving more functions to Brussels. But other countries in the club have often said they want to expand the EU's responsibilities.

"You have countries like France and Germany, which say they want to drive [European] integration further, and they want to be very ambitious -- they repeated this in the [EU] constitutional convention -- but then, at the end of the day, in the budgetary debates, they sign up to the notion that the EU budget should not exceed 1 percent," Durant said.

The commission says a ceiling of 1 percent would not be sufficient and would require "compromises" in the spending program.

Another analyst, Alfred Pypers of the Netherlands Institute of International Relations, notes that the EU budget in any event is quite small when measured against national budgets of individual member states. "For instance -- alone, the Dutch national [annual] budget is twice as large as the complete European budget [over the same period]; that gives you an idea of the rather modest and limited form of the present budget in Brussels," he said.

Pypers added, however, that this effort by the club of six to curb spending should not be seen as a move to actually cut the budget. He said the present EU budget, running to 2006, has also in practice been kept to a norm of 1 percent of GNI.

But there are now more member countries, and more are joining soon. So doesn't this mean the same resources will have to be spread more thinly?

Analyst Durant says this is certainly so. But at the same time, he notes that each member country pays substantial sums of money into Brussels' coffers. That goes for the 10 new members, and will also apply to future members from day one of their membership.

The incoming cash therefore helps offset the pay-outs to the poorer new members, who are net recipients, particularly in terms of the structural and regional aid they receive.

In addition, there is a ceiling to such aid funding, of 4 percent of the recipient country's gross domestic product (GDP). This is seen as the maximum they can usefully absorb into their economies at any one time. The new members mostly have small economies and so the sums involved in terms of the whole EU budget are not large.

Nevertheless, extra money must be found, and the solution is being sought in part by cutting aid given to the poorer old members -- notably Portugal and Greece, but also Spain -- and redirecting it eastwards. This has been strongly resisted by the old recipients, who say they still need the funds to complete their modernization.

Analyst Durant says that another area likely to suffer if the new budget is held down too tightly are the EU's neighbors. Countries like Ukraine, Moldova, Croatia, Albania, and even Serbia and Montenegro are all eager to "Europeanize" with a view to eventually becoming EU members. Most are already receiving EU funds in various aid capacities, and are seeking more.

In view of the demands on the EU's resources, Durant is critical of the old members' stinginess in negotiating the new EU budget. "In my view, there is a very serious risk that the member states will go on burdening the EU with new tasks, saying the union should do this and that, but not giving the money to the union for implementing these decisions."

Reform of super-expensive budgetary items like the Common Agricultural Policy, which consumes 40 percent of the entire EU budget, is also being promoted as a way of saving money. But it's certain there will be no agreement on CAP reform by the time this coming budget is formulated.