The scope of what's at stake. There's nothing to be surprised or scandalised about. The stridency of the reactions and the dramatisation of some of the arguments brought about by anticipations to the European Commission's plans for a "fairer" system of budget financing (see our bulletin of 8 July, p.15) were entirely predictable. This is a touchy subject for public opinion, especially in countries such as Germany and the Netherlands, which feel they are paying Europe too much. Even in times considered more favourable to European integration, there have always been animated debates and decisions were taken at the highest level, after years of discussions. This could be the most infuriating of all of the infuriating subjects. Those who feel they are paying too much want to pay less; those who, in their time, negotiated relatively advantageous positions for themselves (such as the United Kingdom and Spain) don't want to give it up, or to cede as little as possible; the new Member States rightly feel that the principle of Community solidarity and the objective of economic cohesion should not be put aside just as they arrive. Furthermore, each government tends to take extreme stances, to ensure the best possible negotiating position. But we mustn't over-dramatise, or forget that the current rules are valid until 2007. This is quite a comfortable time-frame, enough for a calm and objective discussion. Everyone must bear in mind that changes won't be immediate, and that whatever happens, unanimity is needed for the decision to be taken.
The Commission is right to act. In the midst of all these contradictory national interests, the Commission has the institutional duty to defend the general interest, and to safeguard the essential principles of solidarity, fairness and balance. The negotiations which are starting will be as delicate and difficult as the ones on the new financial perspectives. These perspectives put into figures what the Union can spend in the future; the new document will indicate how the burden can be shared between the Member States. Barring any unforeseen circumstances, the Commission will take position on Wednesday, or next Wednesday at the latest, on the document prepared under the aegis of Ms Schreyer, and at the same time will approve the legislative proposals on the financial perspectives 2007-2013 (see our bulletin of 10 July, p.8). I think the Prodi Commission is right to present its guidelines now, even though it will obviously be up to the Barroso Commission to debate them with the Member States (and, for the legislative texts, the Parliament). I also think that Mr Barroso would be quite right to make these dossiers a priority, once he has the endorsement of the European Parliament (next week), whilst the formation of his Commission is still in its preparatory phase.
An indispensable reform, with a few tweaks. Here are a few initial impressions of the Schreyer document, a few aspects of which are still to be changed or tweaked slightly by the College:
a) it is in effect imperative to change the current system, replacing the "British rebate" with a fairer system to balance out the excessive imbalances of any Member State in the sharing out of costs;
b) the guidelines of the planned "generalised budgetary correction mechanism", stemming from long, in-depth analysis and informal consultation with national governments and scientific circles, are going in the right direction. All Member States whose net contribution to the Community budget exceeds 0.35% of their national product will have the right to benefit by the correction mechanism, to be paid for, in principle, by the other net contributor countries;
c) the details can still be changed, because some calculations raise a certain amount of confusion. In particular, the prospect that under the new system, the UK could become the largest net contributor to the Community budget (in percentage of GDP) could mean that the change is too abrupt. Under the current rules, the British net contribution would be around 0.25% of GDP for the period in question, which is an excessive advantage; with the new system, this percentage would by 0.51% (see the next page for the details), a bit much, even if, at first sight, the analysis by the Commission's services would justify the UK's becoming the number one net contributor.
Readers for whom a more technical and detailed analysis of the Commission's draft, the reasons behind it and some initial reactions hold no fear, please turn the page.
Justification of the revision project, initial national reactions
The revision of the current regime is vital for a range of objective reasons. Firstly: the budgetary situation has changed radically since 1984, when the UK's "compensation" was decided on. At the time, agricultural expenditure covered over half of Community expenditure, and the British hardly benefited from this at all; in practice, they were paying for the agricultural of others, mainly France. Today, expenditure on the agricultural markets has fallen considerably; an increasing proportion of the common agriculture policy (CAP) budget goes on rural development (which the UK benefits from as much as the others), and the CAP budget has been reduced to around a third of the overall European budget. The EU is spending less on agriculture and more than previously on other policies, of which the UK is a beneficiary on the same footing as the other Member States: economic cohesion and regional policy, infrastructure, research, external relations.
Secondly: economically, the British are in a much better position. The United Kingdom used to be the EU's third economic power, behind Germany and France, and even Italy can boast of having overtaken it. Today, the British revenue per head of population is the largest in the Union. If we take 100 as the Community average, the British have gone from 91 in 1984 to 111 in 2003 (second only to Luxembourg), whereas Germany- with the arrival of the eastern Länder- has fallen from 110 to 99, and France has remained stable at 104.
Under the current system, the situation will become even more unbalanced in the future. The Commission's services' calculations show that the "British rebate" would continue to rise: it would go from 4.3 billion EUR a year over the period 1997-2003 (4.9 billion last year) to 7.1 billion as of 2007. This kind of increase in the refund paid back to London is unthinkable at a time when considerably less favourable countries have just joined the Union, and find themselves in the situation of making a contribution to the most prosperous country! The net contribution would be 0.25% of GDP, compared to 0.56% for the Netherlands, 0.54% for Germany, 0.41% for Italy and 0.37% for France, with Sweden and Austria's contributions also exceeding the British percentage. The Commission is not wrong, therefore, that a revision of the system is essential. The United Kingdom is no longer the only country with a right to a rebate as it was decided in 1984. Ms Schreyer's plan provides that the refund mechanism will be generalised: it will be applicable once a country's net contribution exceeds the 0.35% of GDP threshold. But under no circumstances could this rebate be in excess of 7.1 billion EUR (the level the "British rebate" could reach by 2007, if the regime stays as it is). 0.35% of GDP would therefore be considered as an acceptable net contribution if we wish to conserve the EU's "Community solidarity" characteristic. Beyond that, the rebate would come into play.
By 2007 with the new system, the scale of net contributions would be: 0.51% of GDP for the United Kingdom, 0.48% for Germany, 0.48% for the Netherlands, 0.35% for Italy, 0.33% for France. The ceiling of compensation at 7.5 billion EUR a year (see previous paragraph) would guarantee that under no circumstances would the rebate for the rich countries be paid for by the poor ones: the re-balance would be achieved between the "rich" countries, with no implications for the effects of solidarity for the countries which are lagging behind.
No-surprise reactions. There are no surprises in the initial national reactions: generally, those who stand to lose out from the reform oppose it, those who could gain from it support it. It is to be hoped that positions are more objective within the Commission, and that the stance of each Commissioner is not swayed by that of his or her country of origin. In London, there has been no official reaction (as the draft has not yet been approved by the Commission), but unofficially, total rejection: they are simply refusing to countenance the idea of losing their rebate, pointing out that Council unanimity is required to approve the new regime. In Paris, I refer you to the interview (in Le Tribune) with Pierre Lequiller, president of the Assemblée Nationale's delegation to the EU and former (very) active member of the Convention. His view is that the definition of the new regime of Union revenue should precede the debate on the financial perspectives: "before we talk about increasing the budget, we must review its structure because it is unbalanced" and a certain amount of wastefulness needs to be stopped. Once this is done, he does not rule out that France will agree to have its budget increased to 1.05% of EU GDP (although at the moment, the French side with those who have asked for this not to exceed 1%).
As for my opinion on the significance of current national position-taking, I refer you to the previous page: they are understandable, and the debate is just getting started. (F.R.)