Community spending discussions. Last week's European Council established a link between EU economic governance and the Community budget. Point 3 in its Conclusions on governance affirms that the member states' strengthening of fiscal discipline must be reflected on the Union budget and the forthcoming multiannual financial framework. The summit itself will examine “how to get European level spending to make an appropriate contribution” to the different efforts required. These terms are sufficiently diplomatic to avoid an open conflict between the Commission and the European Parliament. They were, however, accompanied by an approach from 13 “net contributor” member states (including Germany, France and the United Kingdom), which called for a ceiling of 2.91% on expansion of the Union's 2011 budget, although the Commission and the EP called for an expansion of 5.8% and 6.2% respectively.
The Commission and Parliament give valid reasons for this expansion: a) Community competences have been expanded with, for example, the setting up of the European Diplomatic Service; b) the majority of member states are opposed to reducing funding for cohesion and agricultural policy and are calling for additional funding for different areas. A certain increase in funding, therefore appears inevitable. It should also be pointed out that Community spending sometimes leads to a reduction in spending at a national level, which often duplicates the task and is less effective. Nevertheless, how can an increase in EU spending be justified to the public, when sacrifices and greater efforts are being demanded by all at a national level and when the EU itself is calling for a reduction in budget deficits? This is not a particularly comfortable situation, especially because several heads of government, of the stature of Angela Merkel, David Cameron and a few others, have reaffirmed that the 2.9% increase is the maximum they will agree to. The 13 signatory countries to this approach also constitute a blocking minority. EUROPE 10247 provided a report on these arguments, which have sometimes been expressed very sharply.
Alain Lamassoure, the president of the EP budgetary committee, focused on what was in his opinion the positive aspect of the approach adopted by these 13 member states. He said that this approach represented “the clearest proof” of the need to reform the current system of funding (which is essentially based on contributions from member states) and replace it with a system of own resources. The Parliament accepts moderation for the 2011 budget in exchange for beginning comprehensive discussions on the future system. The situation is complex due to the different factors that need to be considered (see this column in EUROPE 10239). Formal talks between the Council and the Parliament on the 2011 budget have begun and they are expected to be concluded on 11 November. It is difficult to predict what the result will be.
Should the private sector be involved? One aspect of the European Council results raises a number of questions: the inclusion of the private sector role among the general component parts of the permanent crisis management mechanism. There has already been an agreement on setting up this mechanism (see the summit Conclusions, point 2) and Germany was very eager for this provision to be included. Private creditors are expected to be allowed to participate in the support of a member state experiencing difficulty. Yesterday, our publication examined the subject (presenting the proposals put forward by Finland) on the positions for or against this involvement. From a political and almost ethical point of view, I would say that this request is, in principle, justified: the banks and individuals who purchased bonds from a member state that offered abnormally high interest rates, took a risk; the excessive interest rates which they have enjoyed for a long time can only be justified because of this risk. Beneficiaries have to bear their share of the costs of future rescue operations. The ECB undoubtedly has valid reasons for criticising such a provision but the heads of state and government have their reasons for taking this into consideration among the different elements to include in the future mechanism. We will find out the results at the December summit.
Role and place of countries outside “eurozone”. One aspect that I do not find completely clear involves relations between euro zone countries and the United Kingdom and other member states outside the euro zone. Certain economic decisions relating to the euro are made by the Ecofin Council as a whole and therefore all member states participating in it have the right to vote. At the same time, the Eurogroup is autonomous and its president has the role of informing the Ecofin Council. David Cameron underlined the importance he attaches to the euro and to its working but the United Kingdom is not party to commitments involving the eurozone. In practice, certain uncertainties persist and Mr Van Rompuy has been put in charge of clarifying some of the aspects in this connection. We will have to wait and see what happens.
When the appropriate moment arises, this column will return to the different aspects of the summit Conclusions involving the G20 and the EU bilateral summits with the US, Russia, India, Africa and Ukraine.
(F.R./transl.fl)