EU budget wars begin

Corporate taxation and budget battles over EU expenditure will divide Europe’s finance ministers and European commissioners on Friday.

An informal ‘Ecofin’ council of finance ministers meets in Scheveningen to debate – and dispute – the EU’s hottest fiscal issues.

The Dutch EU presidency is pressing the European Commission by seeking justification for expenditure cost heading by cost heading of Brussels budget proposals.

The aim is to cut European spending for 2007-2013 as national governments prepare for battle with the commission over a planned €28 billion budget boost.

Finance ministers are to tell the EU executive that treasuries are prepared to hand over only one per cent of national wealth to Brussels – not the 1.14 per cent requested.

Commissioners will tell ministers that a one per cent cap would see billions slashed from EU cash targeted at Europe’s poorest areas.

Discussions will set the scene for a major row as EU institutions in an enlarged Europe go to war over spending – talk of greater European integration and boosting economic growth is not cheap, Brussels will tell ministers.

Calling time on British cashback

The Scheveningen meeting will also pressure the UK to surrender Britain’s annual €4.6bn rebate in favour of a more general cashback system for other net EU contributors.

Dutch finance minister Gerrit Zalm tells today’s FT Europe that he will call time on a UK rebate negotiated by Margaret Thatcher in 1984.

“Even in Britain people can understand if countries are in the same position but get different treatment, that is something which can’t be prolonged forever,” he told the newspaper.

“[The UK] has had this exceptional period for 20 years.”

Taxing issues

Elsewhere clashes are expected as old and new EU square up for a bitter battle over national corporate tax rates and funding aimed at Europe’s poorest regions.

Brussels has rejected new French calls – echoed by Germany and Belgium – for ‘tax dumping’ new EU member states to lose European structural funds targeted at economically deprived areas.

Incoming Brussels chief José Manuel Barroso has signalled which side he is on – he has appointed a Pole as new EU regional aid chief and a Latvian as European commissioner for taxation.

Both Warsaw’s Danuta Hübner and Riga’s Ingrida Udre are set to be in the frontline of the fight and are unlikely to wave the white flag on either cash or taxes to France, Germany or anyone else.

Paris and Berlin fear that the EU ten new governments are using low corporation tax rates to lure business into Eastern and Central Europe.

Moves to set a minimum corporation tax threshold across the EU are strongly opposed by countries such as the UK, and France is now shifting the emphasis to Europe’s regional aid.

'Mr Euro'

Also on the agenda, EU monetary affairs chief Joaquin Almunia will get an early review of his plans to make the EU’s troubled Stability and Growth Pact – setting budget deficit rules – more government friendly.

The man to be Europe’s ‘Mr Euro’ as a political counterweight to the European Central Bank will be brainstormed.

Luxembourg’s leader Jean-Claude Juncker is the frontrunner for the post which will put him at the head of meetings of the 12-member eurogroup.

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