Brussels, 29/05/2012 (Agence Europe) - At the General Affairs Council in Brussels on Tuesday 29 May, seven member states (Germany, Austria, the United Kingdom, Sweden, the Czech Republic, Finland and the Netherlands) called for there to be no change in the level of the EU budget. “The new multi-annual financial framework should not lead to an increase in national contributions to the EU budget. Accordingly, total spending for the 2014-2020 period needs to be substantially lower than proposed by the Commission”, states a working paper signed by the seven countries. During the Council debate on a full version of the “negotiating box” on the 2014-2020 financial framework, 15 member states argued for a strong cohesion policy. Few countries backed a reduction in direct payments to farmers, and there was division among member states over new own resources for the EU budget.
Overall size of budget. Germany restated its position that the EU budget for 2014-2020 should be limited to 1% of the gross national income (GNI) of the EU. The 1% limit was also highlighted by the Czech Republic and Finland. Germany stressed the need to spend not more but better and to keep the Community budget under control. The United Kingdom and Sweden said the total budget proposed by the Commission should be reduced by at least €100 billion. The reduction in spending should apply to all expenditure, these two delegations said.
On the other hand, Spain said that, if cuts had to be made, they should not affect the common agricultural policy (CAP) or cohesion policy. Belgium argued that the Commission proposal met the objective of an ambitious and reasonable budget. Ireland deemed the Commission proposal to be balanced. The European budget is not a burden said Luxembourg, in essence.
Agriculture. Spain, Ireland and Finland felt the paragraph in the negotiating box making reference to a reduction in the first pillar ceiling (direct aid and market spending) to be unacceptable. France, too, was unhappy with this direct aid reduction mechanism. Germany also set its face against reducing direct payments, as did Austria and Greece. Some of the newer member states (the Czech Republic, Hungary, Slovakia and Poland) agreed with a possible reduction in the amount of direct aid, but only on condition that the countries whose direct payments were lower than the Community average were spared this reduction. The Netherlands, Sweden and also the United Kingdom backed direct aid reduction.
For Hungary, the proposed budget allocation was a minimum. “Spending better must not become an excuse for spending less”, argued the Hungarian delegation.
The Baltic states (Latvia, Lithuania and Estonia) argued for speedier convergence (redistribution of aid to the benefit of the countries which received less) on direct aid.
Italy had a reservation on the first pillar of the CAP: area criteria alone run counter to job creation efforts. Romania was happy with the overall budget allocation for direct payments, but opposed the idea of capping aid for large farms and called for more ambition to be shown on aid convergence.
Some countries, such as Romania and Lithuania called for the current 85% co-funding level for rural development programmes to be maintained.
Revenue. The United Kingdom expressed the view that the revenue chapter should not even form part of the negotiating box document. It has also issued a “hands off” its budget rebate. Without the rebate, the UK's contribution would be one and half times that of Germany, the UK representative pointed out. The UK is also against the creation of new own resources (which could include revenue from a financial transaction tax), as were the Czech Republic, Sweden, Germany and Hungary. The Netherlands spoke against the financial transaction tax. Those countries which backed such a tax were Spain, France, Poland, Italy, Belgium, Austria, Greece, Slovenia and Finland.
A majority of countries came out in favour of bringing an end to the current own resources based on VAT, but states were divided over plans to create new VAT-based own resources. Several countries, including Spain, Italy, Poland, Hungary, Belgium, Romania, Greece and Ireland, called for an end to the system of reductions and rebates. Germany, Austria, the Netherlands and the United Kingdom, on the other hand, called for the current situation to be maintained. In addition, the Netherlands and Luxembourg were against retention by member states of 25% of the amounts collected for own resources being reduced to 10%.
Cohesion. A fault line is developing over cohesion. More and more states are explicitly expressing their support for this pillar of European policy, because of the important role it has to play in economic recovery and employment. A total of 15 countries (Bulgaria, Croatia, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain) gave their backing to a meeting document presented at the Council. Italy, too, welcomed the document. Thus, the “friends of the Presidency” were able to effect an amendment to paragraph 15 of the negotiating box so that it is placed on record that cohesion policy accounts for a significant proportion of public investment.
The sub-text is that these countries are opposed to any cuts in the budget for cohesion. To those countries which want to spend better (Austria, the Czech Republic, Finland, Germany, the Netherlands, Sweden and the United Kingdom), they say that this does not mean that less has to be spent. Spain made the point clearly: “If cuts have to be made to the budget, they must be made in the headings that have seen the largest increases, and this means not in the CAP or in cohesion”. It could be that a majority of states may back no change in the cohesion budget.
The second fault line that had developed over macro-economic conditionality would appear to be closing. Macro-economic conditionality provides for the suspension of structural funds due to be paid if a country fails to comply with the EU budgetary recommendations in the revised stability pact. A less strident form of words suggested in the negotiating box by the Danish Presidency of the Council of Ministers would seem to have calmed states' fears of a double sanction. With the proposal to cap the partial suspension of structural funding to a percentage of GDP, several member states believe that talks are on the right lines, while acknowledging that much remains to be done. This was the position of France, the United Kingdom, Sweden and Ireland, the latter stating it wanted safeguards. Portugal and Romania were insistent that only commitments, not payments, should be affected by suspensions. This is a point touched on by the negotiating box but one that has still to be decided. Germany, the Netherlands and Finland, on the other hand, remain intransigent, and would prefer to see no softening of the Commission's proposals. At the opposite end of the spectrum, Greece and the Czech Republic want nothing to do with macro-economic conditionality, and will not support it under any circumstances.
Another point of disagreement is the capping of the structural funding that can be allocated to a country at 2.5% of that country's GDP. This proposal incurred the great displeasure of the Baltic States and Hungary which have seen their GDPs fall over the last few years, and which would, therefore, receive much lower structural funding in the 2014-2020 planning period. In the negotiating box, the Danish Presidency has left options open for adapting the cap under certain circumstances.
This does not go far enough to satisfy the Baltic States and Hungary, however. They said it once again during the debate among European ministers, believing that their position has not been reflected in the Presidency proposals. Hungary acknowledged the efforts made by Denmark but called for a different cap, a safety net or a combination of both. Bulgaria and Romania have fallen into line with these states, with Bucharest explicitly calling for greater flexibility.
Negotiations will also continue on the new categorisation of regions proposed by the Commission. While there is broad agreement among member states that it is, above all, the least developed regions that have to be helped, the transition category is currently proving divisive. Sweden and the Netherlands take the view that this category should, quite simply, be removed, the Netherlands arguing even that the idea of transition regions has little support among member states. Portugal is also against the notion and would prefer to retain the “phasing out” system as it currently stands. Belgium, however, is keen on the category of transition regions. Austria works from the principle that all regions must be treated fairly. Ireland rejects the criteria for defining the most developed regions. Given this array of viewpoints, more time in negotiations on the categories of region might be time well spent.
Some member states also brought up the Connecting Europe Facility (CEF) over which numerous question marks continue to hang. Estonia and Lithuania may grudgingly agree to the transfer of €10 billion from cohesion funds to the CEF, the Czech Republic is against it, and the United Kingdom suggests that this is an area where cuts could be made.
A number of countries expressed worries over the eligibility of VAT within cohesion policy. During discussions, Latvia said that that should be kept in the negotiating box. There was also a meeting document of this issue (submitted by Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia and Slovenia) so that a paragraph might be added allowing for non-refundable VAT to be considered as an eligible expense in calculating structural fund contributions.
Several countries, which included France, Portugal, Malta, Finland and Sweden, spoke up for the outermost, island and sparsely populated regions. They all called for an increase in the funding for these regions. (LC/MD/transl.rt)