Can Budapest Formula help ease tension over EU budget?

The countries most concerned about what is called the 'framework budget' are the new member states, which fear that delays will lead to the postponement of EU funded programmes due to start in their countries in January 2007. That's why some are looking towards a suggestion from Hungary.

What's known as the Budapest Formula would see the EU adopt a transitional three year budget for 2007 to 2009 (talks are currently failing on the budget for 2007-2013). The plan was outlined by Prime Minister Ferenc Gyurcsany at a meeting of European Socialists in Vienna. Hungarian Foreign Minister Ferenc Somogyi told Radio Budapest about the compromise:

"If this is the worst case scenario, and there is no possibility to establish a compromise acceptable to all the member states, we propose that in this next phase, i.e. during the Austrian presidency, we try to establish a financial framework that's not for the full period but for, say, three years. Parallel with that we propose thatwe start the process of revisiting basic issues in the functioning of the European Union, their reflections in the budget, in order to have a clear picture of how member states would think the EU should develop."

So what's at stake for the new EU member states of Central and Eastern Europe if the EU fails to put through a future budget which everyone thought had been agreed. Well quite a lot. Tony Blair's plan is to entirely restructure the way EU money is allocated and spent. For example, it involves drastically cutting the 40% of the budget which subsidizes Europe's farmers to about 5%. It's based on proposals by Belgian economist Andre Sapir who spoke to Austrian Radio...

"Our wish is that the EU budget is organised around three funds - a growth fund, a convergence fund, and a restructuring fund. The growth fund, which in our mind should be the largest, should be a fund allocated to the best projects in Europe without the pre-determination of countries. The second fund, the convergence fund, should be reserved for the lower-income countries. The restructuring fund is where we would have some money for farming as well."