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EU budget deal

Christoph Hasselbach / slk
February 8, 2013

The EU heads of state and government have finally agreed on a seven-year budget for the 27-member bloc. But DW's Christoph Hasselbach says that by seeking to please everyone, the budget has set the wrong priorities.


It was a difficult birth. After two summits and several grueling late night meetings, the EU's leaders emerged with a seven-year budget and blackened rings under their eyes. But despite all the work, the product is disappointing. In order to stave off numerous veto threats, three major groups of countries and interests had to be satisfied.

Porträt Christoph Hasselbach, DW Studio Brüssel. Copyright: DW April, 2012
DW's Christoph HasselbachImage: DW

First, the rich countries of the north insisted on cuts to the entire budget. British Prime Minister David Cameron, just as during the summit last November, refused to give in - he's under too much domestic pressure. And now, for the first time, the EU budget will be smaller than it was the previous year.

Secondly, the countries with important agricultural sectors - above all France - wanted to keep their farm subsidies. And thirdly, there were the states of Southern and Eastern Europe, who were fighting to keep EU development money for poorer regions.

Some countries were represented in more than one of these groups, like Germany. While Chancellor Angela Merkel was demanding budget austerity, the minister of agriculture was pushing for German farmers to keep their subsidies with as few changes as possible.

And then, more and more countries began demanding a discount on their membership fees. Britain certainly fought to keep its "eternal" discount.

Cuts in future projects

A single veto would have been enough to kill a budget agreement. European Council President Herman Van Rompuy had the thankless job of trying to please everyone to a certain extent. He succeeded in his job, despite having narrow room for maneuver. But the price of this compromise is that the wrong priorities have been set.

Cuts are being made in research, education, and regional infrastructure projects - exactly the kind of projects that could move Europe forward. These projects would have alleviated youth unemployment much more effectively than quick fixes.

In contrast, the agricultural subsidies hinder more than promote competiveness. They represent the Europe of yesterday. One also has to doubt the sense of structural projects in Europe's less-developed regions. For decades, countries like Spain, Portugal and Greece received assistance from the EU. But this help from Brussels did not resolve the blatant structural deficiencies of their economies.

Budget shortfalls 

The weaknesses of the current system - waste on one side, too little money on the other side - are well known. But the EU has arrived at a lazy compromise, just so that the national leaders can return to their domestic constituencies with something in hand.

On top of that, the EU leaders have created another problem: The budgetary obligations are once again larger than the available revenue. The EU budget for 2013 is already underfinanced because the states have not paid in what they promised to pay. The EU is kicking the can down the road, pushing off growing budgetary holes into the future - something the bloc is legally not allowed to do.

Power struggle with parliament

Now all eyes have turned to the European Parliament. For the first time, the parliament must approve the seven-year budget. And parliamentary President Martin Schulz has made it clear that the legislature will not just rubber stamp the budget.

Up to this point, a large majority of the representatives from virtually all parties have indicated that they do not want to accept further budget cuts and deficits simultaneously - a seeming paradox created by the current budget.

The parliament has a trump card in its hand: Without an agreement, the 2013 budget will be readopted yearly with an inflation adjustment. In that case, there would be no cuts, and the member states would have an incentive to compromise with parliament. That could occur through flexible accounting, by moving money between budget years and areas.

On the other hand, the parliamentarians are also under pressure to pass the budget after such a difficult compromise in the European Council. The coming weeks will show who will win this power struggle and what kind of consequences that will have for the EU.