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EU: U.K. Attempts To Trim Funds To New Members

Foreign Secretary Jack Straw (file photo) (AFP) The British presidency of the European Union has unveiled a trimmed-down proposal for the bloc’s budget for 2007 to 2013. Calculated to please the EU’s main contributors, the cuts primarily affect funds earmarked for the EU’s new member states. Britain argues that those countries will be unable to use all of the money in any case and instead is proposing measures to make spending faster and easier. The cuts have been rejected by the new member states, and most other member states are also critical, suggesting that the EU’s 15-16 December summit may once again fail to pass the budget.

Brussels, 6 December 2005 (RFE/RL) -- Great Britain has its work cut out for it in the next two weeks, having essentially to argue that more can be had for less.

The new budget cuts 24 billion euros ($28.3 billion) from a deal proposed by the previous presidency of Luxembourg in June. Some 14 billion euros of the savings come from funds earmarked for the new member states.

The Luxembourg deal was rejected in June, and this may again be the case at the Brussels summit on 15-16 December. The delay would first hurt new EU members, who need time to prepare for spending under the new budget.

Few governments like the new budget. The poorer countries begrudge the cuts. The richer ones say they are still paying too much. Meanwhile, France is fighting for its large farm subsidies, while Britain wants to keep its unpopular "rebate," a reimbursement integrally linked to farm subsidies.

British Foreign Secretary Jack Straw has acknowledged the challenges, but argues that the British budget package is the best solution for the EU. "The budget proposals we’ve circulated today are a tough package," he said. "They recognize the responsibilities of all members of the European Union to pay a fair contribution towards the future well being of the union. They provide a sound basis on which all our citizens can thrive in this enlarged union."

But the British proposals have been almost universally rejected. European Commission President Jose Manuel Barroso led the wave of condemnation last night. "As it is, the proposal of the British presidency is unacceptable. It is simply not realistic," he said. "It is not realistic considering the enlarged Europe we have now and the stronger Europe we want to have. This is another kind of Europe. This is a budget for a mini-Europe, not for the enlarged Europe we have now and for the stronger Europe we need."

"Whilst we understand the concern that might be there, what we’ve sought to do is to ensure that EU countries east and west -- but particularly east -- can spend a much higher proportion of what they’re actually allocated." -- Straw

When details of the British budget plan first surfaced last week, Barroso likened Prime Minister Tony Blair to the Sheriff of Nottingham, saying that cutting funds to the new member states is "robbing the poor to pay the rich." The European Commission is also hurting because the new proposal undercuts its own initial budget request from 2004 by 17 percent.

And the new member states, spearheaded by Poland, are unhappy with the cuts.

But Straw yesterday defended the British strategy. He argued that the new member states would be unable to spend all their money under present rules anyway. Therefore, modest cuts would make no difference to them. At the same time, "technical but really important changes" have been introduced by Britain to allow them to spend the remaining sums easier and faster.

Straw said this is what should matter to the new member states. "Whilst we understand the concern that might be there, what we’ve sought to do is to ensure that EU countries east and west -- but particularly east -- can spend a much higher proportion of what they’re actually allocated," he said. "And I have to say that if I was a citizen in those countries, that’s what would really interest me, rather than the headline figure which could not be spent."

Straw’s arguments appear to be borne out by experience. Poland, for example, has at this point spent less than 5 percent of its total 2004-06 aid money. Estonia, the most efficient spender, expects to eventually exhaust 90 percent of its funds. The rest will lapse, going back into EU coffers.

But the key to a deal at the 15-16 December summit are not the new member states. They have indicated they can accept some aid cuts. What is crucial is agreement between Britain and France. France rejects any changes to the EU’s farm budget before 2014. Britain wants to hang on to its unpopular and -- in EU budget terms -- irregular "rebate" for the duration.

The British rebate, dating back to 1984, reflects the fact that it gets little back from the EU’s farm budget to offset its general contribution. As the EU’s spending grows, the rebate has grown. It now stands at 5 billion euros ($6 billion) a year. This riles other member states. France is unhappy, because as the biggest user of farm subsidies, it also pays most toward the rebate.

Britain has offered to make a modest cut in the rebate. Straw said the whole rebate could go as soon as the EU stops spending nearly half of its money on agriculture. London says the EU should spend more with the aim of becoming more competitive globally.

France, which has a large farming sector and where the "Anglo-Saxon" model of free-market economy is unpopular, does not agree.