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Europe

EU Budget Deal Costs Germany More Than Expected

Praised as a dealmaker par excellence after engineering last week's EU budget compromise, Angela Merkel has drawn the the opposition's ire after it emerged that Germany's payments to Brussels are set to increase.

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After lavish praise for her negotiating skills, Merkel is now under fire

The annual check Germany, already the European Union's biggest net-contributor before the newest deal, sends to finance the European Union grew by another 2 billion euros ($2.4 billion) as part of the delicate budget deal Chancellor Merkel brokered last week.

"We will have to pay less than we had expected, but we will pay more than in the past," the government's deputy spokesman Thomas Steg said, confirming a report in the Berliner Zeitung daily.

The paper said that from 2007 Germany's net contribution -- the difference between the money paid into the EU pot and the money received in grants and payments from Brussels --
would rise to 10.4 billion euros, equivalent to a rise of around two billion euros a year.


Steg told a press conference that the figure of two billion euros was essentially correct, but said it was the "current state" of the estimates and not a "calculation" nor
the official figure.

The extra money, which Steg said the government was "willing to pay for the historic unification of Europe," will be headed mainly to the 10 new and poorer EU member states. Eastern Germany will also see less benefit from EU money in the form of structural aid.

"A fly in the soup"

EU Gipfel in Brüssel Jose Manuel Barroso und Angela Merkel

Merkel made the deal at her first EU finance meeting

Opposition politicians have criticized the glowing praise showered on Merkel last week for getting all 25 EU heads of state -- including bitter rivals France and Britain -- to agree on a budget at Germany's cost.

"Merkel was celebrated up and down for the wonderful results," Green party finance spokeswoman Christine Scheel told the Berliner Zeitung on Friday. "But when the results lead to a considerably higher German contribute, there's a fly in the soup."

Other members of the opposition wondered how Germany would pay the added costs at a time when it cannot afford the extra burden.

"How should we consolidate the German budget when it is continually saddled with extra costs?" Hermann Otto Solms of the free-market liberal Free Democratic Party asked in the newspaper. "From a financial policy point of view this famous compromise is just plain irresponsible."

In 2005, the German domestic budget deficit is set to violate EU spending limits for a fourth year in a row, a problem Merkel plans to solve by increasing value added tax in 2007.

Best deal possible

Frankreichs Präsident Jacques Chirac auf dem EU-Gipfel in Brüssel

French President Jacques Chirac wasn't willing to cut agriculture spending

Though they're not likely to relish the idea of shelling out more to the EU, members of the governing grand coalition said a better deal could not be expected than the one Merkel negotiated after a marathon session that led to budget of 1.045 percent of the gross national income.

"In this particular situation, Mrs Merkel made a completely sound decision," Social Democrat and Bundestag Vice-President Wolfgang Thierse told a Bavarian public radio station.

Stressing the deal's positive aspects, the government's deputy speaker Steg pointed out that Merkel's late-night agreement was still a 600-million-euro improvement on earlier suggestions from both the British and Luxembourg presidencies.

"The summit succeeded last week in demonstrating that the EU is capable of action. Germany played a crucial mediating role without sacrificing national interests. We have made clear we see this as a huge success," Steg said.

"Any other future compromise would have been considerably more expensive for Germany," Christian Democratic Union finance expert Steffen Kampeter told Reuters.

Over the seven-year budgetary period beginning in 2007, Germany will end up paying about .42 percent of its gross domestic product to Brussels, an increase of .09 percent over 2004. Britain, Italy and France will also end up handing more to the EU.

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