EU Budget Talks Collapse

A last attempt to reach an agreement for the 2011 EU budget failed Monday night, due to reluctance by member states to grant MEPs extra powers in future multi-annual budget negotiations. The EU commission will now have to draft a new proposal, while the first months of next year will be funded on the basis of the 2010 budget,

“There is no drama, the world won’t go under.”

EU diplomat

No Budget - No Drama

The final collapse was mainly due to disagreements over procedures and extra powers granted to MEPs under the Lisbon Treaty, the EU’s new rulebook, European media reports.

Jerzy Buzek

“It’s not good news not to have a budget for 2011, but we will follow procedures,” EU Parliament chief, Jerzy Buzek,  told reporters in a late-night press conference after talks with member states broke down, according to the

Junior ministers from Britain and the Netherlands insisted that the only issue on the table was the budget for 2011 and declined to discuss contentious issues for the long-term budgetary perspective, such as raising more EU “own resources” through supplementary taxes or the “flexibility” of the budget when unexpected expenses arise.

Shortly after announcing €95 billion in domestic budget cuts, Britain has demanded that next year’s EU budget stay frozen at the 2010 levels, or go up by a mere 2.9 percent, less than half of the original MEPs’ request.

Perverse Mechanism

“The Brits didn’t want to hear about ‘flexibility’ as they argued it could create a perverse mechanism by which governments are forced to pay more into the EU coffers,” one EU diplomat says.

Dutch officials were motivated both by similar spending cuts at home and a diplomatic defeat for the Netherlands when Albania and Bosnia were granted EU visa-freedom.

The Dutch EU affairs minister promised last week that budget talks will only relate to the 2011 figures and “nothing else.”

The chairman of the budget committee, French MEP Alain Lamassoure, lashed out at the national envoys, who had no mandate to negotiate anything else but the figure for next year and said that if they were not willing to discuss MEPs’ powers, he would “take it to the European Council in December.”

Bad Blood

For some diplomats, the strategy of the European Parliament was bound to fail, because it wrongly assumed that member states would agree to a budget out of fear of being labelled as “anti-European.”

“There will be a budget, based on 2010 figures. There is no drama, the world won’t go under,” one EU diplomat told the EUobserver.

However, EU budget commissioner Janusz Lewandowski is not of the same opinion.

During the lengthy hours of negotiations he reportedly warned member states that failure to reach an agreement will create “bad blood,” and even lead to higher borrowing costs for the euro zone’s most embattled economies in Ireland and Greece.

A last-ditch attempt by the Belgian EU presidency to separate figures from the “political agreement” on the MEPs’ powers was dismissed by the parliament’s negotiators as “completely unserious.”

The euro-deputies had previously indicated that they would back a 2.9 percent increase in the budget, as demanded by 12 member states led by Britain.

Anyway – now it’s back at square one; the EU commission will have to come up with a new draft budget, and another round of negotiations, at government leader level, are to take place in December.

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Filed under International Econnomic Politics, National Economic Politics