Editor's note

The summit was the second attempt to reach an agreement after a November 2012 failure. The austerity-minded EU member states led by the UK and Germany, won over the “spending states” and reached € 960 bln package of EU expenditures for the next seven years. The summit has brought to an end two-year’ negotiation on most sensitive issue, i.e. financing “common EU policies” through a multiannual financial framework agreement.

It is for the fifth time in the Communities/EU history this type of debate took place (the last time on 7-8 February 2013). Initially, the deal was called “the financial perspectives” (it was brokered in 1988-19992, 1993-99, and 2000-06); in the present form of “the multiannual financial framework or MFF” it was done during 2007-13.

Besides, remarkable enough, this budgetary deal has shown that for the first time in the EU history the long-term budget was not increased…

Contributors & recipients

There are usually several net contributors- 5-6 member states- and a number of recipients – 6-7 major member states. Five EU states –Germany, France, the UK, the Netherlands and Finland (in previous budget cycle-Italy) represent about 60 per cent of the EU financing and 2/3 of the net balances.

 Among largest contributors (on a yearly basis, in € bln, according to different accounts) are: Germany (20% of budgetary funding in 2012) –7,5/9; France (about 16,7%) – 4,9/6,5; Italy –4,8; the UK –4,7, the Netherlands 4,8%) –1,9/2,2 and Finland (1,6%) – 0,6 .

Among the recipient states are: Portugal – 3,1; Belgium – 3,5; Spain –3,7; Hungary – 4,5; Greece – 4,8 and Poland – 11,2. All three Baltic States have been since their accession to the EU permanent “receivers”.  

Competing priorities

The following have been the commitment appropriations for the EU budget (2014-20) – originally proposed and finally brokered (in %):

• Cohesion: from 37 to 33,9;
• Agriculture & fisheries: from 27 to 28,9; CAP received a total of € 361,5 bln over 7 years which makes it more than € 50 bln per year; by 2020 the CAP budget will only represent 1/3 of the EU budget.
• Competitiveness: from 11 to 13,1; spending on research and competitiveness are taking up their position in the budget.
• Rural development and environment: from 10 to 9,9;
• EU as a global player: from 7 to 6,1;
• Administration: from 6 to 6,4;
• Security & citizenship: from 2 to 1,6.                        

Source: European Commission

Budgetary rationale

As a result, the budgetary deal brokered in February 2013 for the MFF in 2014-20 has been at the level of the previous budget of 2007-13, or slightly below 970 bln € (which means yearly payments of 130-140 bln €).

The clear thing is, that until 2020 the agricultural subsidies would be on a constant decline and finally would represent 1/3 of the EU budget. However, some states managed to secure agro-subsidies, e.g. France with a total of € 47,5 bln for country’s farmers.

A special Commission’s fund to support cross-country infrastructure projects (e.g. high-speed train and broadband, etc.) has been cut by about € 11 bln. The reduction could have a slight negative effect for the Baltic States. However, the budget package also includes a further €37 bln in off-budget items.

Conclusion

It seems that despite the budgetary inertia, most EU member states were quite satisfied with the spending they enjoyed presently (rather than opting for the possible gains).

Still the Parliament, in principle, according to the new Lisbon Treaty (art.312 TFEU) – can veto the MFF’s deal. Its President, Martin Schultz said he would not tolerate a big gap between what countries pay and what they commit to spend. However, both the EU leaders and those of the main EP’s political groupings ignored Mr. Schultz’s demand.

Due to the fact that all member states’ leaders unanimously supported the deal, it is hardly any doubt that the Council’s negotiations with the Parliament would change agreement. As is expected, in order to achieve approval, the Council would accept the “urgent” addition of € 3-4 bln to the existing budget. The final message to the rest of the world is, according to the Financial Times (9.02.2013), “that, despite frequent ructions between member states, Europe can be proactive”.