Conflict over €1t EU budget

Everything is set for a trillion-euro EU summit to be bruising, long, and, very likely, inconclusive.

Leaders from the European Union’s 27 countries were arguing in Brussels on Thursday over the bloc’s spending plan for the next seven years now that the United Kingdom has left.

Diplomats and number-crunchers have worked on the budget for years, but the issues are so divisive that the leaders’ summit might last into Saturday and still end without a result.

“There are lot of concerns, priorities, and interests,” said European Council President Charles Michel when he arrived hours early for the summit. “I’m well aware that the final steps that must be taken to find a compromise are always the most difficult.”

Michel set expectations low, saying that “I am convinced that it is possible to make progress”.

German Chancellor Angela Merkel also said she hoped “we get at least a good deal further”. She added that “it is a complicated task and major differences need to be bridged”.

The EU nations need to regroup after the UK’s departure three weeks ago, and a show of unity on their common budget could help in that regard.

“With Great Britain leaving, it is a clear signal we have to give to our citizens that Europe is alive and well and we can continue functioning.” said Latvian Prime Minister Krisjanis Karins. Prospects of that don’t look good.

The UK’s exit means the loss of up to €75 billion (US$81 billion) in net contributions to the budget, and how to make up for that is causing friction. Leaders of rich nations don’t want to have to pay more into that common EU pot, and those from poorer member states are angry at the prospect of receiving less money from the EU.

Even if €1 trillion (US$1.1 trillion) sounds like a lot, it actually amounts to about one per cent of the gross national income of the 27 nations combined. The debate is over some 0.3 percentage points.

It’s not just about convincing reluctant member countries to stump up funds. The European Parliament must also ratify any final budget agreement and the EU lawmakers are not happy.

“At the moment, we remain €230 billion (US$248 billion) apart,” European Parliament President David Sassoli said this week.

After a series of one-to-one meetings with national leaders in recent weeks, with some lasting three hours, European Council President Charles Michel proposed last Friday to set the budget at 1.074 per cent of EU gross national income. The parliament wants 1.3 per cent, while the EU’s powerful executive arm, the European Commission, prefers 1.11 per cent.

Ahead of the negotiations, the 27 member nations are roughly divided into two main camps. The so-called ‘Frugal Four’ of Austria, Denmark, the Netherlands and Sweden versus the ‘Friends of Cohesion’, a group of mainly central and eastern European nations who want to see the continued flow of ‘cohesion funds’, money earmarked to help develop poorer regions.

Ahead of the summit, the Frugal Four, who would like the budget to drop to as low as one per cent of gross national income, rejected Michel’s offer in a Financial Times newspaper op-ed, saying that in light of Brexit “we simply have to cut our coat according to our cloth”.

Complicating things further is the level of global uncertainty beyond the continent. While climate change was largely a technical matter during the last budget negotiations seven years ago, this time the EU is planning to spend a quarter of its budget on green issues.

Add that to the many other, varied issues the budget will cover – like agriculture, education and transport – and it makes for a difficult summit.

Outside the summit centre, farmers were already rolling in tractors in the street to push their demands for sufficient funds.

– AP