Sudden burst expected of Heads of Government. Negotiations on the new EU financial framework for the period 2007-2013 were practically opened by the Summit last week and by the statements of several Heads of Government (see our special bulletin of 27 October). Regarding the essential aim of this summit, which was the last phase in enlargement negotiations, the Heads of Government had the sudden burst of political energy expected of them when they proved that, when they have to, they can be aware of their historic responsibility (see this column dated 23 October). But such a result would not have been possible if they had not also known how to fix the principles and a certain number of firm points for the Union's future financing. Their concern for finances has nothing scandalous about it, as it is the duty of all governments to ensure that taxpayers' money is correctly used and to honour the demands of budgetary balance and the commitments of the Stability Pact. This is a perilous and sometimes acrobatic exercise that deserves respect, on condition that balance is maintained between budgetary austerity and the main political objectives. And this is what the Heads of Government seemed to have managed last week.
Financial negotiations are therefore open; and the going will be tough. The current financial provisions are valid until the year 2006 included, and it has long been known that their renewal for the next seven years will be complicated, controversial and relentless. The trickiest aspects are agricultural policy (CAP), Structural Funds and the "British rebate", as, together, they cover over 80% of total European expenditure. The several principles already finalised seem -despite the chorus of lamentations from those who would have liked immediate dismantling of CAP - a sound basis for departure.
Global nature of negotiations. Negotiation will cover all aspects of Union spending (and also receipts). The position of the governments that would have liked to introduce the principle of isolated reduction in agricultural spending not to mention other aspects of the budget were untenable, and it is quite logical that France was opposed to it and that, on this point, it got what it wanted.
Stabilised agricultural spending. The current financial framework of CAP remains logically in force until its deadline (commitments must be honoured), and for the later period France has agreed to the principle of stabilisation, and even a certain amount of reduction, in spending as the "inflation" clause is very restrictive: increase with an annual ceiling of 1%, while even the ECB and the most optimistic of Finance Ministers know that real inflation will be higher (but only a little, it is hoped). This ceiling is therefore equivalent to a fall in spending in real terms. At the same time, work is making headway on the adjustments to the CAP that will allow expenditure to be stabilised without, however, being detrimental to European farming. I shall come back to the latest interesting developments of this issue.
Structural Funds confirmed. The "Brussels conclusions" explicitly point out that the guidelines relating to CAP financing will also apply to the other budgetary aspects. A passage on these lines appeared in the draft but disappeared from the final text (mainly because Spain, Portugal and Greece considered any reference to generalisation of budgetary provisions retained for agriculture as inappropriate). The principle of the global nature of negotiations nonetheless implies that everything will be discussed when the time comes. Pending the proposals that Michel Barnier is preparing on behalf of the Commission, it is important that no government has called for current mechanisms to be abolished. There will be adjustments, but the principle of European solidarity towards the less advantaged areas or areas lagging behind will be maintained (which did not seem acquired some time ago). The attitude of Spain, which was often designated as the country that does not wish to give up any of its current advantages, was very dignified and highly responsible, with Mr Aznar addressing the following message to his fellow citizens: "Fortunately, several Spanish regions will come out of Objective No1 of regional policy (regions lagging behind in development), thanks to the economic progress of these regions". Such presentation will facilitate future negotiations.
"British rebate" to be renegotiated. Despite the excitement shown by part of the press, this aspect was not even discussed by the Summit in session. The idea that the concessions forcibly extracted by Ms Thatcher in her time could be brought into question for the period preceding the 2006 deadline was pure invention, through ignorance or bad faith, for creating a casus belli. But Jacques Chirac has now declared that, in his view, extension after 2006 is no longer justified as the situation has changed. For the government of London, on the other hand, the situation has remained the same and the rebate must be maintained. Negotiations on this subject will not be easy, but they are not something Tony Blair can avoid. (F.R.)