Saturday

21st Jan 2017

Analysis

EU budget summit exposes weak Franco-German relations

It was funny old summit last week. It broke off without agreement on the EU's 2014-2020 budget. But the failure was neither a big surprise nor particularly acrimonious.

Already before the meeting, German Chancellor Angela Merkel, something of a weathervane for EU decisions, said it would be no big drama if agreement only came in spring.

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After negotiations, several EU leaders remarked that the mood had been comparatively positive. Indeed, on Friday (24 November) afternoon the biggest point of dispute appeared to be whether to continue to try to reach a deal.

Eventually they broke off. The mooted four-shirt meeting was a mere two-shirter, no longer than a traditional summit. The statement afterwards was unusually to the point.

There "was a sufficient degree of potential convergence to make an agreement possible in the beginning of next year," it said.

The EU's €1 trillion 7-year budget has never been solved in one summit. Former British leader Tony Blair, in charge of the discussions in 2005, famously concluded that negotiating the Northern Ireland peace process was easier. For budget historians 1999 was a notoriously toxic affair.

The surprise was the changing alliances ahead of and during the summit. And the fact that Britain was not isolated - even though the ingredients were all there for it to be so.

Ahead of the summit, British leader David Cameron lost few opportunities to speak of the "wasteful" EU budget. Faced with a restive domestic parliament, he was also the first to threaten to use the veto - although that particular club became steadily less exclusive as the summit approached.

The budget antics came on top of a profound evolution in the UK's relations to the EU, to the extent that there has been much talk of whether London, with every disparaging comment, is simply talking itself out of the European Union.

But before the meeting, care was being taken both in Berlin and Brussels to meet Britain's concerns. UK officials, for their part, let it be known that the initial pre-summit proposal went in the right direction, even if it did not go not far enough.

During the summit, Germany made sure Britain was not isolated. Along with the Netherlands and Sweden, the four said the proposed €973 billion budget was still too large.

The other major dynamic of the meeting was the lack of a Franco-German bulwark. In 2002, for example, President Chirac and Chancellor Schroeder - much to the chagrin of Blair at the time - cut a long term deal on farm spending. The deal, extremely beneficial to France, tied the hands of budget negotiators in 2005.

But relations and priorities are different now.

Paris is still keen on farm and regional spending, but Germany attaches more worth to cutting the overall bill.

Relations between Chancellor Merkel, a conservative, and France's President Francois Hollande, a socialist, are not particularly warm. Their views how to get out of the economic crisis are very different.

Meanwhile, France has still to undertake serious structural reforms - reforms its large neighbour already undertook by 2005. Consequently, Germany views France as one of the sick men of Europe. Earlier this month, given an opportunity to do so, its finance minister Wolfgang Schaeuble could not bring himself to praise France's economy and reform efforts.

The discrepancies have put the relations out of kilter. And this has had a knock-on effect. EU Council chief Herman Van Rompuy's initial budget proposal was an anathema to France. It cut both farm and regional subsidies and kept the British rebate.

Paris was said to be alarmed at the way the pre-summit negotiations were conducted and particularly the fact that Berlin worked closely with London.

"I think psychologically the French are in an unusual place," said one diplomat. "Because of their standing in the system and that they are masters of (budgetary) detail, they are used to getting their own way pretty easily."

"The Germans have been saying [to France]: 'Well if you want to be the hyphen between the North and South, then you have to accept the consequences. We are no longer necessarily going to be looking after your interests in quite the same way'," the diplomatic source added.

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

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