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Europe

Opinion: Curtains Up for EU Budget Fight

With its budget preview for 2007 to 2013, the European Commission has opened the gates for presumably tough clashes over EU funds.

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The battle over the EU budget for 2007 to 2013 could end up being less fierce than in the past. For the European Commission has already responded to harsh criticism from the net payers -- those countries that contribute more than they receive -- and proposed a budget significantly lower than the Union's paymasters had expected.

The Commission plans to spend an average of 1.14 percent of the Gross National Income (GNI), though it had threatened 1.24 percent. The spaces after the comma are important, because in real numbers the difference is €15 billion for the budget; Instead of €158 billion the EU Commission has demanded only €143 billion. It's a success for the net payers, who in their notorious "budget letter" to the Commission in December had insisted that EU expenditures be capped at 1.0 percent of GNI from 2007.

The Commission has made a move, and now it's up to member states to take moves themselves if they want to avoid an escalation of the fight over funds. Their populist demand that the EU budget should be frozen at 1.0 percent of GNI isn't sustainable. With the tasks that the EU has given itself -- enlargement and a more self-confident foreign policy -- budget increases are inevitable. If German Finance Minister Hans Eichel and his European colleagues seriously want to save, the member states will have to scale down their tasks and their demands. Whether they have the power to do that at the moment is debatable.

Expenditures in question

The biggest chunks in the EU budget preview up to 2013 remain agricultural subsidies and structural aid for disadvantaged regions. Nearly 80 percent of the funds pour into this gigantic reallocation apparatus, the sense of which many experts and EU parliamentarians now question. The EU Commission has been trying to take countermeasures by increasing four-fold the currently modest expenditures for education, research and innovation after 2007. All told, the sum for agriculture will remain nearly the same. That is, its relative proportion within the overall budget will drop.

The logic of subsidies for rural areas and other purposes urgently needs to be examined. The EU must make a greater effort to trim its sprawling administration to cut costs. Around 6 percent of the budget is consumed by the bureaucracy. If you add to that hidden costs you quickly reach 10 percent or around €10 billion. The European Parliament with its two venues in Brussels and Strasbourg, its administration in Luxembourg and a rather comfortable set-up eats up an additional billion.

Spain, Poland could profit

When the upcoming battle over finances comes to an end all of the then 25 member states will have to approve the budget master plan. Spain, so far the largest net receiver, will have to be content with less money from Brussels. The new members want subsidies, too. Poland wants more money for its farmers. That could also mean a drop in the amount of funds the eastern German states have so far received.

The wrangling over subsidies haven't yet really begun. They could still be mingled with the debate over a constitution, in which Spain and Poland play central roles. More than once German Chancellor Gerhard Schröder, head of government of the largest net payer, has indicated that it could be financially worthwhile for Spain and Poland to give way in the feud over the constitution.

In its budget plans, the European Commission wrote that "Project Europe" isn't just about reallocating funds between net payers and net receivers. The issue must also be European solidarity and political advantages that the net payers get from the Union. In the midst of troubled European atmosphere, one would hope that the heads of state and government take these truthful words to heart.

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