EU Summit Returns to Budget Battles

Most discussions of European Union affairs does not revolve around constitutional matters. Recent weeks have been exceptional in having a political rather than economic thrust to EU issues. With the EU Summit yesterday and today in Brussels, the leaders of Europe return to more familiar ground – fighting about the budget in general and Britain’s rebate in particular.

The idea is to come up with a spending plan for the years 2007 to 2013 that will cover around €1 trillion. And the issue comes down to whether a country is a net contributor or a net recipient of EU money. Nation’s like Ireland, Portugal, Spain and Greece, want the money that flows into their pockets to continue. The Netherlands, Luxembourg and the UK, would rather reduce the spending levels because they kick in more than they get back. The biggest expenditures come on agricultural subsidies, which make up a bout a fifth of the spending under discussion. Unfortunately, the 2002 agreement on these subsidies is in effect until 2013, so they are off the table.

Instead, Luxembourg has suggested a €50 billion cut to programs on increasing European competitiveness (camouflage for industrial subsidies), € 10 billion on foreign policy spending (aid to poor non-Europeans), and the €5 billion rebate that the UK gets. This rebate, won in 1984 by Mrs. Thatcher, adjusted the budget to reflect the fact that the UK has a very small farm sector and so got little agricultural support compared with France and Italy, and the fact that it kicked in a lot of money because of a high VAT and high import levels. And the British were the third poorest nation in the EU per person. But now, with 10 new members, mostly poorer than the older members, and with the Brits ranking as the fourth wealthiest, there is some thought that the UK shouldn’t be getting a rebate.

That is not to say that the case is Britain against the Continent. The fact is that Germany, the Netherlands and Sweden are against the idea of a rebate only because Britain gets one and they don’t. On a per capita basis, the Brits put in about €50 whereas the Germans approach €100, while the Swedes and the Dutch are good for more than €100. If there’s a rebate, they want their cut.

So the summit is going to be the scene of a great standoff. After the French and Dutch voters tossed out the constitution, the leaders of the EU aren’t going to get a budget deal. And even if they do, the EU parliament won’t pass it, opting for annual budgets. In other words, the Europeans really are content with things as they are now.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
Produced using Fedora Linux.

Home