Rich EU countries put forward budget cap proposal


Just days after the EU failed to agree on a new constitution for Europe, and a new row appears to be emerging - this time over money. Six of the EU's richest countries called this week for EU spending to be capped, something which would hit the 10 new members that join in May.

Photo: European Commission
Joining me now to discuss this latest wrangle is my colleague Rob Cameron. Rob, the EU was unable to agree on voting rights last weekend, now the sticking point appears to be money. It' s not a very happy time for European integration, is it?

"Not at all. It's just days since EU leaders failed at their summit in Brussels to agree on a new system of voting rights in the new enlarged Union, something which was a crucial part of the draft EU constitution. Now, a group of six EU members - Austria, Britain, France, Germany, the Netherlands and Sweden - want the EU's budget to be reduced."

By how much?

"Well, they're calling for spending in 2007-2013 to be capped at 1.0 percent of Gross National Income (GNI) - down from the current ceiling of 1.24 percent. Now that might not seem much, but it would have a severe effect on the ten newcomers, including the Czech Republic, because it would effectively freeze EU spending at current levels at a time when unprecedented amounts of cash are needed to pay for enlargement."

So why are they doing it?

"Well according to some observers it's a case of the big wealthy EU countries giving a none-too subtle hint to the two countries which are perceived as responsible for wrecking the Brussels summit - Spain and Poland. It was Spain and Poland who blocked the new voting rights proposal - they were adamant they weren't going to lose the disproportionately large slice of voting power they were given under the Nice Treaty. So it looks like the big countries that pay for the EU are reminding Spain & Poland - and particularly Poland - exactly who's boss. In other words, if you're not going to play ball, we're not going to pay up. And Poland, of course, badly needs the EU's cash."

Although I'm sure that's not how it's being portrayed at an official level, this being the European Union.

"No, of course not. A spokesman for the European Commission denied there was any link at all between the failure of the Brussels summit and this budget-capping proposal. But a seasoned EU-watcher would say you've have to be very naïve to believe that."

So what happens next? Will the issue be resolved?

"It must be resolved at some point in future. The EU's institutions have to be reformed, otherwise a 25-member EU won't work. This latest argument is simply big countries drawing battle lines for the skirmish to come. Everybody knows newcomers such as Poland can't have it all their own way. Everybody knows the system of voting must be reformed. Everybody knows there will have to be some spending cuts in future, especially for some current EU members which are no longer as poor as they used to be. It just hasn't been possible - yet - for the EU 25 to reach a compromise. But reach a compromise they must, because otherwise the whole process of European integration will simply grind to a halt. Or, as some big countries have suggested, we will see the emergence of a 'two-speed' Europe."