Monday, November 26, 2012

EU Leaders Work on Seven-year Budget

The New American
November 23, 2012




EU Leaders Work on Seven-year Budget
The European Council meeting in which EU leaders will attempt to reach an agreement on the multi-annual financial framework (MFF) for 2014-2020 began in Brussels on November 22 and EU leaders continue in their struggle to find common ground to set a budget.
BBC News reported that UK Prime Minister David Cameron told reporters in Brussels on Friday that this was not "a time for tinkering" with the EU's 2014-2020 budget, and "unaffordable spending" should be cut. "It isn't the time for moving money from one part of the budget to another," Cameron said. Cuts are "what's happening at home and that's what needs to happen here."
Cameron was reacting to a proposal from summit chairman Herman Van Rompuy (who is also President of the European Council and a former prime minister of Belgium) that keeps the spending ceiling in place but reallocates funds.  
During the early stages of the summit, Cameron met with French President Fran├žois Hollande and Dutch Prime Minister Mark Rutte. Citing German Chancellor Angela Merkel's statement that she doubts the summit will reach a deal and President Hollande's warning that an agreement might not be possible, the BBC's Matthew Price reported from Brussels that "the chances of success do not look great."
Reuters news report noted that Cameron seeks a real-terms freeze in EU spending between 2014 and 2020, and also is pressuring the EU to cut its salary expenses by 10 percent, raise EU officials' retirement age from 63 to 68, and reduce their generous pensions benefits — measures that would cut about €6 billion from the seven-year budget, largely a symbolic reduction. The report noted that Cameron's position is geared to capitalize on an increasing anti-EU mood in Britain, where even the media has become skeptical of the EU and has portrayed the budding regional government as a wasteful bureaucracy overloaded with staff receiving overly generous compensation packages. Reuters notes that Cameron's stance may also appease the anti-EU camp in his ruling Conservative Party.
A more detailed financial analysis of the EU budget negotiations from Bloomberg said that the spending plan under discussion represents about one percent of the EU-wide gross domestic product, which is small in comparison to the average 50 percent of GDP that member states spend internally. However, in tough economic times, there is political pressure for European nations to cut their contributions to the EU. Bloomberg notes:
Wealthier countries such as Germany, the U.K., Denmark, Sweden and the Netherlands have banded together to cut what they pay in to the budget, pounding away at the original proposal of 1.033 trillion euros ($1.3 trillion) that came out in mid-2011.
Early negotiations have already reduced the proposed EU budget to about €950 billion. (The euro is currently valued at about $1.29.)
European Parliament President Martin Schulz, in a move to convince the wealthier countries to pay more into the EU budget, asserted that it is less expensive for them to promote European projects, since contracts in Latvia or Slovenia go to companies in places such as Germany and Sweden, reported Bloomberg.
"Every euro invested by the EU attracts an average of between 2 and 4 euros in additional investment," Schulz told the leaders. "The EU budget is not a zero-sum game in which one country wins what another loses. Synergies are generated which benefit the net contributors as well."

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