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AFP
February 16, 2020

New budget plan sets stage for EU summit battle

Business

AFP
February 16, 2020

Brussels: Brussels set the stage for a fierce budget battle at next week´s extraordinary EU summit, with a trillion-euro plan that meets no-one´s demands.

The summit´s host, European Council president Charles Michel, is seeking a compromise to clear a path to agreement on a seven-year budget framework for the bloc.

But the already fraught process has become more difficult as Brussels tries to plug the multi-billion-euro hole left in its finances by Britain´s Brexit divorce.

Initial reactions to the document in Brussels diplomatic circles suggested Thursday´s summit will devolve into a fierce argument between member states that will likely end without agreement.

The richer mainly northern countries that are net contributors to EU programmes want to cap spending at around one percent of the union´s total GDP. But the main parties in the European Parliament have demanded 1.3 percent and have threatened to block any proposal they feel won´t cover their ambitions.

For its part, the European Commission has proposed a budget of 1.11 percent of economic output to fund EU president Ursula von der Leyen´s ambitious "Green Deal" agenda.

Von der Leyen has warned Britain´s departure will leave the union short of 75 billion euros ($82 billion) over the seven-year budget period, and she wants a quarter of that ring-fenced for the fight against climate change.

Michel´s compromise plan proposes a budget capped at 1.074 percent of the bloc´s GDP, estimated at 1.1 trillion euros over seven years.

This number is close to the figure arrived at last year during the six-month Finnish presidency of the union -- a figure that member states have already rejected.

There will be cuts in agricultural spending, which France will not like; and in regional aid, riling newer members.

Net contributors Germany, Denmark, the Netherlands, Austria and Sweden would not see their rebates abolished at a stroke as they had feared, but they will be reduced over the seven-year-period.

Union spending is small compared to the members´ national budget, but tight-pursed members like Denmark and the Netherlands are resisting spending more to make up for the end of British contributions.

In order to free up more money from outside the disputed budget, Michel´s plan proposes increasing the capital held by the European Investment Bank by 100 billion euros.

This could mobilise 500 billion euros in loans to invest in climate change mitigation and the digital economy. But the battle lines are drawn.

"As one of the biggest net contributors, the Netherlands believes the EU should keep a tight rein on spending: clear choices must be made," Dutch

premier Mark Rutte tweeted.

"Member states´ positions are still far apart so there´s lots of work to be done," he said, arriving in Paris to talk with French President Emmanuel Macron.

Macron, for his part, has dismissed the German-led push for a budget capped at 1.0 percent of GDP.

"A Europe with a budget of around one percent doesn´t really have a policy," he said earlier this month.

According to a report in Der Spiegel, Germany´s Chancellor Angela Merkel is ready to compromise on the one percent goal, but only if spending is shifted to projects for the future.

This would mean cutting funding for agriculture and regional development, funds that France and Spain want to protect.

Under the Michel plan, agricultural expenditures are to drop significantly to 354.1 billion euros. This would be 53 billion euros less than in the current seven-year budget.

Cuts are also planned for aid to structurally weak regions: It is to be reduced by 44.5 billion euros to 323.2 billion.

In both cases, however, it should be possible for the member states to call on funds more flexibly -- allowing them to shift cash back to their own priorities in some cases.

Regions that host refugees will also receive a bonus in structural aid and seven billion euros have been earmarked for a new EU military-industrial defence fund -- less than the 11.5 billion euros proposed by the commission.