Wednesday

7th Dec 2016

New EU budget proposal cuts across red lines

  • Summit room - EU budget hawks have threatened vetoes in November (Photo: Valentina Pop)

The Cypriot presidency has proposed cutting €50 billion off EU spending plans for 2014 to 2020 - a number that could trigger national vetoes and strikes by EU staff.

The Cypriot paper, circulated late on Monday (29 October), said spending should be "at least" €50 billion less than the European Commission's figure of €1,033 billion over the next seven years.

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It added: "According to the assessment of the presidency this is a starting point for delegations in order to reflect on the effects of reductions. More sizeable reductions are needed in order to reach a compromise."

Breaking down the cuts, Cyprus said cohesion funding - designed to help poor regions in the east and south of Europe to catch up - should go down from €495 billion to €472 billion.

Spending on farm aid and rural development should go from €386 billion to €379 billion. Funds for foreign policy are to remain more or less the same at €18 billion. Spending on pre-accession aid and global development should go from €70 billion to €65 billion.

It noted that money for EU institutions will also "have to be revised downwards" from the commission's €63 billion, but it did not give a new number.

With the biggest cuts to come on cohesion, the Cypriot idea will annoy the 13 eastern and southern EU countries in the so-called "Friends of Cohesion" group.

But the overall €50 billion reduction is set to face even bigger opposition from some of the 10 states in the so-called "Friends of Better Spending" club.

A "centrist" sub-group in the "better spending" alliance - containing EU paymaster Germany as well as Denmark, Finland and France - had earlier called for cuts of at least €100 billion.

A more hawkish element - containing the Netherlands, Sweden and the UK - wants to go further by cutting €115 billion to €130 billion off the commission's proposal.

The UK and the Netherlands have threatened to veto an EU budget deal at an upcoming summit in November if they do not get their way.

Swedish sources are also saying "the content of the deal is more important than the timing ... We also have a very strong position."

The Cypriot paper touches on the thorny question of national rebates.

It includes, in brackets, a commission idea to take away the UK's permanent rebate, in favour of "lump sum" rebate payments for the 2014 to 2020 period.

But, given the UK's rejection of the plan last week, it adds another option: "[The existing correction mechanisms in the current system of own resources of the European Union will continue to apply]."

It says nothing about a Danish plea for a €150 million-a-year rebate for Copenhagen - the subject of another veto threat.

Top EU officials have already warned the November summit could last as long as four days.

For its part, the EU commission on Tuesday morning said: "This [Cypriot] negotiating box is not supported."

"There are many in this city who believe there can be a deal, but just as many who think it will be difficult," an EU source said.

Meanwhile, amid the talk of further slashing pensions and perks for EU officials, things could get messy in the EU capital.

EU trade unions also on Monday announced a strike on 8 November, with an added warning of further strike action on 16 November if their position is not taken into account.

Correction: the original story said Finland wants cuts beyond €100 billion. In fact, it is in the "centrist" group with France and Germany

No euro crisis after Italian vote, says EU

The Italian PM's resignation after a failed constitutional referendum has not changed the situation, the Eurogroup president has said. Financial markets have remained stable.

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