Brussels, 17/06/2005 (Agence Europe) - In an attempt to reach agreement on the EU's finances for 2007-2013 (the 'Financial Perspectives'), the European Council was set to examine a new draft compromise drafted by the Luxembourg Presidency around 8 o' clock in the evening on 17 June (after agreeing on Thursday evening to a way out of the constitutional crisis, see other article). In the afternoon, the President of the European Council, Jean-Claude Juncker, and the President of the European Commission, Jose Manuel Barroso, held meetings with heads of state the most opposed to the planned future funding of the European Union, namely France, the Netherlands, the United Kingdom and Sweden. The rendezvous clause proposed by the Commission for a mid-term review of EU spending, along with the efforts made by some countries (like France) to agree to a simple freezing of the British rebate, or the United Kingdom, to agree to a cut in its rebate to avoid penalising the new EU Member States, seemed to suggest that agreement might still be reached.
On Friday morning, the European Council examined the Luxembourg Presidency's compromise document of 15 June (see EUROPE 8970), foreseeing a freezing of the British rebate at EUR 4.6 bn until 2013 at least, directly linking the rebate to farm spending; respecting the October 2002 agreement on farm spending, adapting it to take account of the accession of Romania and Bulgaria; the confirmed objective of a budget of no more than 1% of EU Gross National Product (GNP) in payment credits (1.06% in commitment credits); changing the decision on own resources in favour of Germany, the Netherlands and Sweden; additional structural aid for various regions of Poland, Cyprus and ultra peripheral regions; and continuing the Spanish Cohesion Fund for two years.
During an exchange of views on the text, President Chirac said the most recent Luxembourg Presidency proposals could constitute the basis of an agreement, given the problems in reconciling views and the need for everyone to make an effort. But he stressed that France's agreement would depend on the question of the British rebate, adding that the proposal in this area was unsatisfactory and a greater reduction should be made. He felt that re-examining the issue after 2013 should involve phasing it out. On the CAP, Chirac said it unacceptably twisted the 2002 agreement because an additional EUR 6 bn would be needed to properly finance farm spending foreseen for Bulgaria and Romania. He said it would oppose any additional reductions in direct aid up until 2013 because of the future accession of these two countries. He opposed the idea of connecting the future of the British rebate post-2013 to any review of farm spending. He said the overall package was very high (involving EUR 10 bn more to be contributed by France over the period, compared with its 2006 contribution) and Chirac said he would not agree to any additional increase in the EU's spending. He added that the amount foreseen for France for the European Development Fund was still too large (19.51%).
UK prime minister Tony Blair again refused to accept challenges to the British rebate, but suggested refunding the new EU Member States for their share of the funding of the rebate (in other words a EUR 500 mil reduction per year). Noting that the EU's budget should take account of citizens' concerns and priorities, Blair called for a rehaul of EU spending. The UK argues that this is not necessary to reach agreement at this summit on the Financial Perspectives but agreement should be reached about the basic principles of reviewing EU expenditure.
German Chancellor Gerhard Schroder said agreement was needed at the European Council and said he was prepared to accept the compromise, adding that Germany was not prepared to spend any more. He was supported in this by Jacques Chirac, who added that in the past it was usually Germany that had agreed to pay more to help the EU out of budget crises, but there were limits to this. Schroder said that Germany was the third highest contributor to the EU budget by inhabitant, but only the 11th in the league table of beneficiaries of the EU budget.
Dutch prime minister Jan-Peter Balkenende said the compromise did not make a big enough cut in the Dutch contribution to the EU budget. The Luxembourg Presidency suggested a EUR 450 mil cut in the Dutch contribution, but the difference between what the Netherlands receives from the EU and what it pays in is EUR 3 billion. The Netherlands repeated its call for a reduction in CAP and Cohesion Policy spending.
Sweden said the Luxembourg Presidency's compromise would still cost too much, and further cuts could be made. Goran Persson is reported to have urged his EU counterparts to take more time and negotiate a better budget. He told reporters that EU heads of state still had time and didn't have to rush.
Most new Member States expressed general satisfaction with the compromise.
Austria said it was prepared to accept the agreement, but criticised the planned cuts in rural development aid.
Denmark said it could agree with the compromise, noting that its main objective was a substantial increase in aid for technological R&D. Anders Fogh Rasmussen said the budget had to be much more future-oriented.
Ireland said it would accept the compromise, despite sacrifices, and called for the 2002 agreement on farm spending to be respected.
Italian prime minister Silvio Berlusconi softened his tone, having won improvements over the Structural Funds that almost reflected what Italy saw as the minimum. Problems remained concerning Sardinia (which is eligible for aid) and the way national prosperity was calculated. Italy is generally calling for a review of spending priorities and a more modern budget to boost innovation and competitiveness) and suggested including a clause to review the budget around 2009. (President Barroso has also suggested a 'rendezvous clause' at the end of 2008 or thereabouts, Ed.) On budget contributions, Italy called for the British rebate to be at least frozen, aware that Rome provides 25% of it.
Spain said it was prepared to agree to huge cuts in its regional policy aid, but not as huge as suggested in the Luxembourg Presidency compromise document. Jose Luis Zapatero called for a transition period of more than two years for Spain's Cohesion Fund aid to be phased out, and called for the 2002 farm spending agreement to be respected.