THE E.U. BUDGET (2)

I predicted last month that this week's summit to agree the 2014-20 framework for the E.U.'s budget would end in gridlock. That duly happened; after a two day dialogue of the deaf, everybody agreed to go home and try again in the new year.

My prediction, though correct, was not particularly insightful. Because the underlying problem is that Member States disagree hugely about what the E.U. Budget is for. For countries such as the U.K., it's a waste of money that should be kept as small as possible. For the new club members from Eastern Europe, it's a way of reducing the income differentials vis a vis the earlier fifteen. For southerners with lots of farmers, it's an important source of funding, now that domestic budgets are being squeezed. For federalists, it provides useful transnational funding for research and education. And so on and so forth.

These differences have always existed. But with 27 Member States and the European Parliament all having a veto, the permutations and complications have become increasingly complex. Before the last 7-year framework, the Germans, in a spirit of compromise, threw in an extra Euro1 billion at the last minute in order to get an agreement. Now nobody has Euro1 billion to spare, and they would not be inclined to offer it up, even if they had.  

It is not easy to see how this one will pan out. It could be that everyone is just posturing before accepting an unpalatable outcome. Personally I doubt it. To take but one example. Denmark's demand for a rebate of Dkr.1 billion (a figure calculated from its Dkr.800 million contribution to the U.K. rebate plus Dkr.200 million to the other rich countries' rebates) has already been factored in to the Government's long-term financing plans, and sold to the Danish electorate as such (i.e. in the bag). Other Governments face equally restive Parliaments and/or electorates. Against that background, the budget negotiations could well run for some time yet.

Walter Blotscher