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EU: Commission's Enlargement Funding Proposals Draw Friendly Fire

Brussels, 12 February 2002 (RFE/RL) -- The European Commission's proposal on funding European Union enlargement, revealed two weeks ago, came under fierce criticism from a number of EU member countries today.

EU diplomats say Austria, the Netherlands, Great Britain, and Germany indicated that they would like to see significant changes in the commission proposal before it is adopted by the EU as a formal negotiating position in the three so-called "money chapters" dealing with agricultural policy, regional development aid, and the new member states' budget contributions.

Some of the objections contend that the commission plan is too expensive. Others suggest the EU should radically reform its expensive common agricultural policy (CAP) before the candidates can join.

The commission proposal earmarks some 40 billion euros ($35 billion) for up to 10 new members between 2004 and 2006. Controversially, the proposal makes provisions for farming subsidies to farmers in the new member countries, but says the payments would only start at 25 percent of EU levels, reaching 100 percent only in 2013.

Presenting the proposal to EU finance ministers today, the EU's Budget Commissioner Michaela Schreyer said it represents a "good compromise" between the financial interests of the 15 member states and the candidate countries.

Schreyer said the current members will incur fewer costs than originally planned at the Berlin summit of 1999, which fixed the EU's budgets for 2000 to 2006. She said the current members would save money since enlargement would take place in 2004 instead of 2002. Thus, instead of the projected 58 billion euros ($51 billion), enlargement will now cost only 40 billion euros.

Also, Schreyer added, the commission has proposed that the new members start making payments into the EU's budget as soon as they join. This means that the extra financial burden on the current member states would be only half of what was projected, coming to only 0.08 percent of their gross domestic products.

Schreyer said the candidates also are getting a better deal than originally foreseen in the EU's 2000 to 2006 budget, which made no provisions for any direct payments to farmers in new member states. Under the commission proposal, they would now receive 25 percent of EU levels in 2004.

Yet, the proposals remain too expensive for some.

EU officials say Austria's objections today were the sharpest. Austria's Finance Minister Karl-Heinz Grasser is said to have demanded that enlargement be financed from the funds set aside for 2002 to 2004. According to this argument, the candidates were originally scheduled to join in 2002 and budget allocations for 2004 would be too much for the first year after accession. This would mean only 31 billion euros ($27 billion) would be available for the new members between 2004 and 2006.

More seriously, the largest net contributor to the EU's budget, Germany -- backed by Austria, Great Britain, and the Netherlands -- objects to the commission proposal that candidate farmers receive even limited direct subsidies. In its radical form, this argument says that as the 1999 Berlin budget compromise eschewed any direct subsidies for candidate farmers, they should not receive any.

EU officials indicate the commission's offer of 25 percent of EU subsidies in 2004 is likely to remain, however. They say it would be "a political impossibility" for the candidates to join having failed to negotiate subsidies at all.

Officials say it would be harder to fend off German, British, and Dutch demands for a radical CAP overhaul before enlargement. Many member states, together with the European Commission, feel that the potentially acrimonious CAP reform debate could seriously delay enlargement. Most acknowledge, however, that Germany, together with the other net contributors, would not agree to the enlargement unless the "mid-term" CAP review to be launched in June provides some fairly clear indications for reform after 2006.

Central to the question are the so-called "direct payments" presently available to most member-state farmers. Germany and others argue that extending them to the new members would entrench the subsidies in EU law and make them virtually impossible to abolish when the new budget is launched for 2007 to 2013. German officials have in recent weeks been adamant that Berlin would not agree to the doubling or even tripling of its budget payments that would inevitably result from the extension of the current subsidies to the candidates.

Hence, it seems increasingly likely that the EU's agricultural policy will see significant reforms before enlargement, in the course of which the direct payments regime will be either abolished or severely cut back.

EU diplomats say the need for reforms is now even acknowledged by France, the biggest agricultural aid recipient, although Paris is unwilling to publicly contemplate the issue before parliamentary and presidential elections this spring and early summer.

According to present indications, the reforms would be settled in 2003, after negotiations with candidates are concluded but before they join as full members. After they sign their accession treaties in early 2003, the new members would be eligible to participate in the talks. However, they would lack voting rights until the treaties are ratified in early 2004, although EU diplomats say their views would receive "fair consideration."