Europe News

EU commission budget proposal faces barrage of criticism

Jun 30, 2011, 14:22 GMT

Brussels - Proposals by the European Union's executive to increase the bloc's budget and fund it via a financial transaction tax (FTT) faced a barrage of criticism on Thursday, as EU governments battling with cuts to their own spending demanded more austerity.

On Wednesday, the European Commission proposed to limit spending over the 2014-2020 period to 972 billion euros (1.4 trillion dollars), equal to 1 per cent of the bloc's gross national income (GNI).

But 58 billion euros for specific projects, including a nuclear fusion reactor, taking global EU spending to 1.06 per cent of GNI, were kept off the balance sheet.

According to Eurosceptic group Open Europe, that represents an increase of 'at least 7 per cent' compared to 2007-2013 spending.

'It is not time to spend more, but to spend better,' France's foreign, budget and agriculture ministers said, reacting in a joint statement. 'The budgetary discipline efforts conducted by the states must also be shared by the European Union.'

'The commission is going for an overall financing sum that is well over the level that the German government regards as justifiable,' German Foreign Minister Guido Westerwelle added in Berlin.

Westerwelle said the entirety of EU spending needed to come under the 1-per-cent-of-GNI level, or 'about 1,000 billion euros.'

British Prime Minister David Cameron's spokesman called the plans 'unrealistic,' while Dutch Europe Minister Ben Knapen told NOS Radio that the proposals were 'very disappointing,' pointing out that 'some spending is actually outside the budget.'

France, Germany, Britain and the Netherlands, along with Finland, had written to the commission in December asking for EU budget increases to be capped to inflation.

Danish Finance Minister Claus Hjort Frederiksen also criticized the 'excessive spending level' of the commission plan.

Northern European countries are traditionally seen as more Eurosceptic, but even Italy joined the chorus on Thursday.

'It is indispensable for us that our national net contribution is reduced,' Foreign Minister Franco Frattini said in Rome.

According to the latest figures, dating to 2009, Italy was the second largest contributor to the EU budget, with 5.9 billion euros, coming after Germany's 6.3 billion euros.

The EU executive did respond to austerity calls by rolling out plans to freeze administration costs, cut staff by 5 per cent by 2018, raise retirement ages and increase working hours - triggering strike threats from EU personnel trade unions.

Plans to introduce the FTT - which according to EU officials should contribute some 37 billion euros by 2020, covering almost 23 per cent of the EU budget - were also criticized.

European Central Bank President Jean-Claude Trichet told the European Parliament that introducing such a measure in the EU would drive out investors - a 'dreadful disadvantage' at a time when the bloc needed 'as much activity as possible,' he argued.

Britain, Sweden, the Netherlands and the Czech Republic echoed that criticism, extending it to parallel suggestions to tweak value-added tax (VAT)-based national contributions to the EU budget.

The French ministers, however, said earmarking a portion of FTT revenues for Europe is among the commission proposals 'that France is ready to work on.'

Spanish EU affairs minister Diego Lopez Garrido also hailed the FTT idea as 'courageous.' The European Parliament, which called for its introduction earlier this year, applauded the proposal too, as did Austria.

Budget commissioner Janusz Lewandowski said that giving the EU more of its 'own resources' would allow the scrapping of the Byzantine system of national rebates that over decades has been introduced to reduce disproportionally high national contributions.

In its place, four countries which would otherwise pay too much into Brussels' coffer would receive 'lump sum' discounts. Under the new system, Britain would get 3.6 billion euros a year, Germany 2.5 billion, the Netherlands 1.05 billion and Sweden 350 million.

EU officials warned that richer countries' net contributions to the EU budget would have to increase to cover the cost of regional aid to the poorer members in the east.

Downing Street said Britain would continue defending its rebate, which was won in the 1980s by then-prime minister Margaret Thatcher, in an epic battle with EU partners.

'Without it, Britain's net contribution as a percentage of national income would be the largest across the EU, twice as large as France's and Italy's, and almost one and a half times bigger than Germany's,' a spokeswoman said.

The position will put Britain on a collision path with France, which declared that any 'extension' of the rebates is 'unthinkable.'

EU governments have to agree on the budget by 2012, and also secure the consent of the EU assembly. 'There will be complicated negotiations,' Swedish EU Minister Birgitta Ohlsson said.