Budget

The big question entering Thursday’s summit is whether Herman Van Rompuy, the European council president, can find the right balance between the UK’s demands for an austere long-term budget and France and Italy’s calls for a more robust one. The more Van Rompuy stretches toward the Brits and fellow budget hawks by reducing his proposal, the more those on the other side of the debate pull back. Eventually, the whole thing could snap.

But on the eve of the big meeting, Van Rompuy may have found a clever way to give his budget more elasticity: By increasing the gap between budget commitments and payments. Read more

Martin Schulz, far right, with his fellow EU presidents ahead of budget talks on Monday.

Just how bleak do things look for next week’s summit intended to reach a deal on the EU’s next €1tn seven-year budget?

Only hours after French prime minister Jean-Marc Ayrault threw cold water on the latest compromise effort, another major player in the game – Martin Schulz, the European parliament president – said he now expected the high-stakes summit to come up empty.

“I’m very sceptical about an agreement next week,” Schulz told a small group of Brussels-based reporters, arguing that the compromise put out yesterday by Herman Van Rompuy, European Council president, was significantly different from that offered by the Cypriot presidency just two weeks ago – a sign of “how deep the division is within the Council.”

Van Rompuy’s proposal (a leaked copy of which we’ve posted here) has set off another round of recriminations, helping turn a meeting this morning of EU ambassadors into a complaint-fest, diplomats said. But Schulz said he believed the biggest stumbling block remained Britain, which is the only country calling for a complete EU budget freezeRead more

Even before the European Court of Auditors released its annual review of EU spending on Tuesday, negotiations over the bloc’s next long-term budget had already turned tense.

A group of wealthy nations, led by theUK, are demanding more budgetary discipline and tighter controls on EU spending. Facing off against them are the poorer member states, led byPoland, which tend to benefit disproportionately from EU funding and are determined to keep the money flowing.

The auditors report is likely to give fresh ammunition to the first camp, while putting the second on the defensive. It found that there were “material errors” in 3.9 per cent of the bloc’s €129.4bn in spending last year – meaning more than €5bn was paid to those who should not have received it. The error rate was up from 3.7 per cent in 2010 and 3.3 per cent in 2009.

The worst offenders were the agriculture payments for rural development, where the error rate was 7.7 per cent, and the cohesion funds used for energy and transport projects, where the rate was 6 per cent, according to the report. Read more

Britain's Cameron, left, talks with EU Commission president José Manuel Barroso at May's summit.

With last night’s release of new numbers by Cypriot negotiators, the debate over the EU’s seven-year budget is beginning to heat up, with battle lines hardening over whether – and how much – funding should be cut from the European Commission’s original €1,033bn proposal.

In today’s dead tree edition of the FT, Josh Chaffin points to the growing debate over rebates – one that could have a direct impact on the country EU officials say has been the most difficult negotiator in recent rounds, the UK. Whether the issue is being raised now in an attempt to threaten Britain into softening its hard-line insistence on a budget freeze is unclear.

What is clear, however, is that the European Commission is going for the jugular. In an 8-page paper circulated by the Cypriot presidency last week, and cited in Josh’s story, the European Commission makes a direct attack on Britain’s sacrosanct rebate, saying Britain’s “unique treatment….seems no longer warranted”. We’ve posted a copy of the document hereRead more

Britain's David Cameron meets EU's Herman Van Rompuy at Downing Street last year.

Aides to Herman Van Rompuy, the European Council president, have circulated an updated draft of conclusions for next week’s EU summit and, according to a copy obtained by Brussels Blog, they have retained controversial proposals for a single eurozone budget and “contracts” between eurozone countries and Brussels on economic reform programmes.

Unlike the previous proposal by Van Rompuy’s staff, which was labeled “guidelines” and intended only to generate discussion, the current text (a copy of which we’ve posted here) comes in formal “draft conclusions” form – a technical yet significant difference, meaning there was widespread support for the ideas in talks with eurozone member states.

As we reported ahead of this week’s Conservative party conference in the UK, the idea of a eurozone budget has even gained support from the British government, which views it as a way for the 17 eurozone countries to increase their spending on a European level even as the UK freezes its commitment to the EU-wide budget for all 27 members.

However, in a tweak of the Van Rompuy language that appears aimed at Britain, the communiqué makes clear that any plans for a eurozone budget – or “fiscal capacity” in eurospeak – would be separate from negotiations over the EU-wide budget, which is known as the multiannual financial framework: Read more

For the unfortunate diplomats locked in the Justus Lipsius council building all of Friday and into Saturday morning, the European Union’s 2012 budget negotiations were an arduous affair. Upon emerging, one groggy diplomat lamented “an evening I can never get back.”

But to the union at large, the remarkable thing about the talks was how easily they went down.

For those who missed the news early Saturday morning, representatives from the EU’s 27 member states, the European parliament and the European commission agreed on a 2.02 per cent increase in next year’s budget, bringing it to €129bn.

That was well below the 5.23 per cent sought by MEPs, and the 4.9 per cent recommended by the commission. Read more

Cameron and Barroso last week at Downing Street, where they discussed the EU budget

Amid all the hand-wringing about the Greek parliamentary vote on the key €28b austerity package this afternoon in Athens, the European Commission will meet to give its final assent to its proposed EU budget for the next seven-year cycle, normally the most-watched event on the Brussels agenda.

Much of the outlines of the budget have already been reported on the pages of the FT, but many will be watching the top line: just how much will the Commission, which, as the EU’s executive branch, has the responsibility for kicking off the 18-month negotiations, propose member countries should contribute to Brussels’ budget?

This will be a big question for David Cameron, British prime minister, who has made cutting down on Brussels’ spending the centre of his Europe strategy. For reference sake, after the jump we are re-publishing a letter Cameron got his French and German counterparts to sign calling for an effective freeze on the seven-year budget plan, known as the mutli-annual financial framework in eurocrat-ese. Read more

During his normal mid-summit breakfast with reporters, José Manuel Barroso, the president of the European Commission, the EU’s executive branch, was in a feisty mood, despite the late session Thursday night.

Barroso gave an overview of the debate over treaty changes and a summary of what he hopes will be a strong statement in support of the euro today.

But his most pointed comments were aimed at reports of a letter being circulated by Britain and other member states attempting to set limits to the seven-year budget framework, which starts in 2014. Read more

The clash over next year’s EU budget has widely been viewed as a contest between the austere and the profligate. The end result, after a final round of negotiations collapsed in the wee hours of the night, is that the forces of austerity, led by UK prime minister David Cameron and his Dutch and Danish allies, prevailed over a spendthrift European parliament.

But there is another – often overlooked – element to the debate that animated the member states’ unexpectedly stubborn stance: a desire to punish a Parliament that has grown increasingly assertive – some say grasping – since the Lisbon treaty came into force in December.

“There’s a feeling that they’re just going to keep pushing and pushing for more power. So it’s better to confront them now,” one diplomat explained. Read more