By Bruno Waterfield - 7th June 2005
Brussels expects European leaders to find agreement on future EU budgets next week despite Europe's constitution crisis, Dalia Grybauskaite has told EUpolitix.com.
The Lithuanian European Commissioner for Financial Programming is quietly confident that a June 16/17 Brussels deal can be found.
Referendum setbacks and a looming election in Germany are overshadowing talks to set the EU’s ‘financial perspectives’ for 2007 to 2013.
Many in Brussels are increasingly pessimistic that there is political room for national governments and EU institutions to manoeuvre.
But Grybauskaite’s soundings at informal meetings, councils of Europe’s finance and foreign ministers “is the opposite”.
“Twenty-three or twenty-four member states have very explicitly stated that the best window of opportunity is in June. But of course some member states may be thinking that sometime this year would do.”
“No matter what happens in European politics, elections, referendums and so on, the necessity of a deal in June is very much understood and accepted by most member states,” she told this website.
“I think we are moving forward. We still expect an agreement in June. Even later this year there is still room for manoeuvre.”
Under pressure
EU leaders will be under pressure to find agreement this year or key European funding programmes could collapse.
Agreement could be difficult under the UK EU presidency – Britain is embroiled in a row over its rebate – making June 16 the best moment.
“In 2006 it’s too late, because then we will be jeopardising our negotiations on the 2007 budget. We need 12 to 18 months for the programming period, to prepare for the legal basis,” she said.
“If we have a deal in 2005 we still have the time but of course the best window of opportunity is in June. Politically it is the best time and also technically as it gives us enough time to prepare the legal basis.”
But the former Vilnius finance minister is not blind to the pressures on governments – and the risk posed by political uncertainty to delicate EU negotiations on the sums national capitals pay to Brussels coffers.
“Some governments are very much overwhelmed by internal situations and the European agenda is a little bit left behind. This we feel in the negotiations and this partly jeopardises our negotiations,” she warns.
Referendums and elections
Political events in the Netherlands – the EU’s biggest per capita cash contributor – are unlikely to make The Hague more conciliatory on calls to cut European Commission spending projections.
Looming elections in Germany – Europe’s largest net contributor – are expected to act as something of a check on Berlin’s flexibility to back down on demands that EU expenditure be capped at one per cent of Europe’s Gross National Income (GNI).
Grybauskaite will not be drawn on which two countries may not be pushing actively for a quick deal.
“I don’t want to speculate too much at this stage, or name specific countries, because the situation is changing so fast.”
As a former government minister and an EU diplomat, the commissioner acknowledges the external pressures, but also considers the factor of strong European traditions in both the Netherlands and Germany.
“Any timetable, any negotiation, can be influenced by national elections. But the leaders of [both countries] have huge European experience and responsibility. I believe that these member states will make more responsible political decisions, because they understand that their decisions will have direct consequences on all 25 member states.”
MEPs vote
Ahead of Wednesday’s Strasbourg plenary vote, Grybauskaite believes a firm majority in support of proposals tabled by the European Parliament’s Temporary Committee on Policy Challenges and Budgetary Means of the Enlarged Union will be helpful.
Grybauskaite is clear that MEPs are thinking along the right lines as far as the commission is concerned – particularly on headline figures setting a ceiling to spending ‘commitments’.
“The proposal that was voted on in the temporary committee is very close to the commission’s - at least if we just take the figures into account.”
“The committee proposes 1.20 per cent in commitments. But then you have to remember that two funds are excluded, the European Development Fund and Solidarity Fund. If you take these funds out from our proposal, in order to compare, the commitments are only 1.22 per cent.”
“So they are very comparable. There are only slight differences and we think that the commission’s proposal and parliament’s are quite close.”
EU presidency
Grybauskaite is holding fire on a recent negotiating gambit from Luxembourg’s EU presidency.
A final version is expected after a hectic round of bi-lateral meetings between Luxembourg’s Prime Minister Jean-Claude Juncker and EU leaders.
But early signs are not good and behind an external reserve Grybauskaite is obviously less than impressed, even angry.
“A comprehensive proposal is not available, and we do no have all the figures, but the levels that we have seen so far are of course a long, long way below what we, and the parliament, are proposing.”
She is particularly dismayed by mooted cuts to EU budgets allocated for driving up Europe’s competitiveness.
Hostile arithmetic
A move the commissioner identifies as hostile to new EU policy areas and the idea of European added value.
Grybauskaite is concerned that national governments are playing maths, trying to squeeze expenditure ceilings to or around one per cent of GNI, rather that looking at which policies are needed.
“I will try to be as objective as I can. [Cuts] are very large, surprisingly large and the main hit is to the competitiveness area and to trans-European networks.”
“These are the areas which give the most European value added and which are the most modern parts of the European budget. That is, of course, politically very, very unsatisfactory because it looks as if the cuts have been proposed just arithmetically, to reduce the ceilings as much as possible,” she said.
“From a political point of view it is very disappointing. Still, in spite of these huge cuts, research and innovation funding, for example, is doubled. So, we cannot just be negative. But as I said, in general, the largest cuts are in the areas which are the most modern.”
Regional policy
Another EU spending area feeling the squeeze from penny-pinching national treasuries is regional policy – European funds targeted at Europe’s poorest areas.
EU15 countries such as Spain, Greece, Portugal and Italy are demanding a “phasing out” cushion.
When ten new, mainly poorer, EU members signed up in May 2004 average European GDP took a 12 per cent tumble making it harder for some regions to make thresholds for payment.
“The cuts are proposed in the range of funding. That’s an important element of it. It’s not the final cut, in the final figure. The range still allows some flexibility in trying to accommodate the main needs of less developed regions and member states.”
“But the reduction is quite significant, especially for the phasing out regions, which will affect the countries from the EU15, and which is quite sensitive and very painful for some member states,” says Grybauskaite.
Pain in Spain
The commissioner insists that the EU can not be blind to the impact, both material and political, to a sudden shift in funds from Europe’s old south to the new east.
“These discussions are of course very sensitive… In my opinion the commission’s proposal is very balanced. We try to accommodate the new enlargement and the soft phasing out.”
“Concretely, Spain is a very typical example. Overnight Spanish funding would be cut very, very significantly without phasing out. No country can afford that politically. No government can survive such huge changes in their income overnight.”
“In principle, we all agree that phasing out is supposed to happen. But we cannot jeopardise one or another member state just because of the statistical effect.”
UK rebate
Another vexed issue and a possible barrier to achieving closure on the financial perspectives this year, under the imminent British EU presidency, is the UK’s annual rebate, won by a hand-bagging Margaret Thatcher in 1984.
“This is a very political issue, no matter what technical proposal we will put on the table. One solution could be politically acceptable for one group of member states, but not for another.”
“The correction we are talking about is about €5 billion. It’s really not a huge amount in the budget, but politically it is very sensitive,” says the commissioner.
“The commission is ready, together with the Luxembourg presidency, to help find a solution that is acceptable for all 25, including the UK. We are open for a compromise solution.”
Sending a signal
In the days ahead Grybauskaite considers progress in budget negotiations an indicator of the EU’s ability to surmount the political problems currently surfacing in referendums and elections across Europe.
“The difficulties which we are facing now in budget negotiations reflect those the EU is facing. Future enlargement, the creation of a single market, including services, immigration policies, etc, all this is reflected in the negotiations.”
“The budget is a reflection of policies and if policies are facing difficulties, if it is difficult to find a common solution acceptable to all, the budget is in exactly the same position. That is why the negotiations are complicated.”
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