Monday

30th May 2016

Focus

New EU budget draft seeks cuts in farm aid, cohesion

  • Farm subsidies are taking the biggest cut in the new budget proposal (Photo: caese)

New member states and France are set to lose most from a fresh EU budget proposal slashing €75 billion from proposed 2014-2020 spending, but Britain still wants more cuts or it will veto the deal at a summit next week.

Drafted by EU Council chief Herman Van Rompuy, the new "negotiating box" seeks cuts in almost all areas, with farm subsidies - which France benefits from the most - slashed by €21.5 billion compared to the initial EU commission proposal of €1 trillion overall for the seven-year period.

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Funds for infrastructure and enterprises to help eastern member states to catch up with the West - so-called cohesion policy - is also set to receive €17 billion less than planned.

Neither French nor Polish diplomats were happy about the draft.

"It is clearly not what we wanted," one source told this website. Paris has already slammed a previous compromise tabled by the Cypriot EU presidency, which had sought smaller cuts in farm subsidies.

For his part, Polish Prime Minister Donald Tusk is currently busy shuttling between Brussels and Berlin in his bid to make the case for the "Friends of cohesion" - a group of countries benefiting the most from regional spending.

"Germany as a net payer has clearly a different view than Poland and the Friends of cohesion, but we have always been able to find common ground," Tusk said on Wednesday (14 November) at a joint press conference with Chancellor Angela Merkel.

"Germany wants big cuts, but Poland says these cuts should be more balanced, to protect this growth mechanism that is cohesion policy," he added.

Merkel said she is willing to seek a compromise next week and warned that having no deal on the seven-year budget would damage EU credibility.

"Even if we are net payers, it is not our goal not to have a deal. We will do our best to reach an agreement, one that is fair for everyone," she said.

A German government spokesman earlier in the day welcomed the Van Rompuy text.

"It is a good thing to have compromise proposals, we are now in the hot phase ahead of the summit and we all have an interest in reaching a deal next week," Merkel's spokesman Steffen Seibert told a press conference.

The current proposal is closer to what Germany first had in mind - €120 billion less than what the commission tabled.

"I think in the end we'll get a deal on cuts of around €100 billion," one Cypriot diplomat told this website. Asked why Cyprus earlier proposal only went called for cuts of €50 billion, he replied it was "negotiating tactics."

"The key to the deal is Britain," the source added.

As for British sensitivities, the draft goes nowhere near what would be acceptable for Prime Minister David Cameron not to use his veto.

"We think it's still too high and the cuts don't go far enough. It will be difficult to get a deal," a British source said.

Sweden has also said it is unhappy with the proposal, which seeks to reduce the Swedish rebate by some €25 million while leaving Britain's multi-billion-euro rebate untouched.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

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