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EU: Deal On Enlargement Costs Aims To Fix Budget Limits Until 2013

European Union leaders are close to an agreement on the financial terms of enlargement after a bilateral deal between Germany and France defused a long-standing row over the EU's future agricultural expenditures. Under the deal, expected to be endorsed today, farm budgets would be frozen between 2007 and 2013 at 2006 levels, with subsidies to new members gradually catching up with those available in the current EU. However, the deal effectively means that new members will be excluded from major budget decisions between 2007 and 2013.

Brussels, 25 October 2002 (RFE/RL) -- The deal between France and Germany yesterday freezing agricultural spending limits between 2007 and 2013 removed the greatest obstacle from the path to a common European Union position on how to finance enlargement.

Germany is the biggest contributor to the EU's budget, and France is the biggest recipient of the EU's Common Agricultural Policy, or CAP, which consumes half of the EU's annual budget of nearly 100 billion euros ($97.73 billion).

Speaking early today, Danish Prime Minister Anders Fogh Rasmussen, who chairs the Brussels summit, said the deal was accepted by all EU member states.

This means the EU can now launch the final phase of accession talks, Rasmussen said, which should lead to a final comprehensive agreement at the EU's Copenhagen summit in December. "We have agreed upon the [European] Commission proposal as far as the 'phasing in' of direct income support is concerned, which gives the [Danish] presidency and the commission the mandate to finalize [accession] negotiations with the candidate countries," Rasmussen said.

Overnight, the EU's Danish presidency set out the main lines of the financing compromise.

The main element in the compromise is the Franco-German deal on agriculture. Farm spending in the enlarged EU will be capped at 2006 levels until 2013. The new members will, upon accession in 2004, receive 25 percent of the direct income subsidies available to farmers in the current member states. Their entitlement will go up in yearly increments until it reaches parity with the rest of the EU in 2013. The current member states will receive correspondingly less each year until subsidies level out in 2013 at about 80 percent of the current levels.

British Foreign Secretary Jack Straw commented on the farm-spending deal today in Brussels. "Above all, what we've got is a cap, a ceiling, on the amount of spending that can take place on the Common Agricultural Policy, and that is of very great importance. And that is why even countries like Germany, which pay a lot, lot more than we do for the European Union, are content with the outcome," Straw said.

Another key element of the deal says there will be 23 billion euros available for the candidates in structural-development aid between 2004 and 2006. This is 2 billion euros less than suggested by the commission but 2 billion euros more than suggested by Germany in recent months.

Third, the financing compromise makes it clear that budget compensation is available for those new members who risk being worse off in the early years of their membership than in 2003.

Significantly, however, the financial compromise also introduces budget limits on all major areas of EU expenditure for the next 10 years.

Thus, the draft agreement -- expected to be formally endorsed by the Brussels summit today -- states that the "principle of stability" for the EU's Common Agricultural Policy set out in yesterday's French-German deal should likewise be a "guiding principle for other areas of EU finance." In other words, structural-development aid for poorer areas, which makes up more than 30 percent of the EU budget, will in all likelihood be capped at 2006 levels, as well.

This reflects a preference among the current 15 EU member states for getting as many major budget decisions as possible out of the way before the new members join.

Conversely, the new members will find that their influence on decisions affecting the EU's next 2007-2013 budgetary period will be severely limited.

Danish Prime Minister Rasmussen admitted as much early today. "I would like to stress we are going to have real negotiations with the candidate countries. But there is one thing I have to make clear: We stick to the financial framework, we stick to the present budget, but within this framework there is room for flexibility," Rasmussen said.

This, and the very fact that some new members risk becoming net payers into the EU budget, powerfully underscores the point that for many years after enlargement, significant differences in access to funds will remain between the old and new member states.

The Brussels compromise also contains a controversial provision saying current EU member states can apply economic "safeguard measures" against any new member states that "have failed to implement commitments undertaken in the context of accession negotiations." The measures can be invoked already before accession, and may remain in place for more than two years. The aim of these safeguard measures is clearly to placate those present member states who fear that not all potential new members are, in fact, ready to join.

Finally, the Brussels summit offers a ray of hope for Bulgaria and Romania, neither of which will join the EU in the first wave. The summit conclusions say both countries are to be given detailed road maps, "including timetables," at the Copenhagen summit in December.

Turkey also receives reassurances that strongly hint at the possibility that a date for the start of accession negotiations could emerge from the Copenhagen summit.