Monday

21st Sep 2020

No breakthrough at EU budget summit

EU leaders failed to reach agreement at their first attempt on the next seven-year EU budget on Friday (21 February) after a two-day summit in Brussels.

"The differences are still too large," German chancellor Angela Merkel said after the meeting.

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"We need more time," EU council president Charles Michel told reporters. "We know this EU budget is a very difficult negotiation, especially after Brexit and the gap of €60-75bn [the UK has left]," he added.

As EU leaders came to the summit on Thursday, most countries had already rejected the proposal put forward by Michel last Friday, who set the overall spending at 1.074 percent of the EU's gross national income.

Talks then got stuck between a richer group of member states, the 'Frugal Four' - the Netherlands , Austria, Denmark, and Sweden - that wanted to see EU spending capped at 1.0 percent and a larger group of 17 member states, the 'friends of cohesion', that wanted to see more investment.

The 'Frugal Four' were pointing at around €20-26bn in spending that could be saved in the safety margin of the budget plans, and on cutting back the student exchange program Erasmus or free Interrail tickets.

During the summit, however, Hungary's prime minister Viktor Orban told journalists that the 'friends of cohesion' group would rather want to see a spending level of 1.3 percent of GNI.

The European Commission, on Friday evening, put forward a proposal on adjustments that would mean an overall spending of 1.069 percent of the EU GNI. In actual payments from member states over the seven-year, 2021-2027 period it would mean 1.049 percent of the EU's GNI.

The commission's numbers cut mostly from research and innovation, space, defence, and neighbourhood programmes, a convergence program for countries not yet in the eurozone, and some safety margins planned within the budget.

Crucially for net payers, who had rebates - financial corrections that the UK originally won -, the commission's proposal also meant the rebates would remain at a nominal value, something other member states had rejected.

Based on the proposal, Austria would receive an additional €100m and the Netherlands could keep a higher amount of tax levies collected on behalf of the EU at its ports, while Denmark and Sweden would get corrections for supporting the eurozone budget.

Another key adjustment would have been capping one of the so-called 'own resources' of the EU budget, the contributions of member states from the EU Emission Trading System (ETS).

In the end, EU leaders gathered for only 25 minutes on Friday evening to reject the possible new numbers both from the net payer and cohesion countries' side.

"The proposal was not supported by either side," Croatia's premier Andrej Clenkovic said, referring to the two groups of countries.

Michel said he needed informal consultations in the next days and weeks to find a new date for another summit to crunch the budget numbers.

Red lines

There was also some frustration among EU leaders after two-days of talks.

"Quite frankly, I have heard enough of red lines today," Merkel said after the meeting, referring to tough positions presented by member states.

The Netherlands, Austria, Denmark, and Sweden dug in their heels, and stuck together under pressure despite promises to keep the rebate.

"My concept of the European project is different from the one put forward by Dutch prime minister Mark Rutte. I see the EU as a chance and not as a bill," Luxembourgish premier Xavier Bettel said after the meeting.

"I don't see why we should cut Erasmus in order to give others a rebate," he added.

Commission president Ursula von der Leyen sounded more optimistic.

"Sometimes things have to take their time to mature. We aren't there yet, but we are on a good way," she said.

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Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

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EU leaders arriving at the Brussels summit criticised the budget proposal of EU Council president Charles Michel, as richer member states insisted holding onto their rebates, while poorer countries wanted to avoid deep cuts to their subsidies.

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