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25th Sep 2022

Barroso 'extremely disappointed' over budget collapse

European Commission chief Jose Manuel Barroso has expressed his "extreme disappointment" over the failure of member states and MEPs to agree to the bloc's 2011 budget, and warned of the negative impact of this breakdown.

"I'm extremely disappointed that talks between the Council and the European Parliament on the 2011 budget have broken down," Mr Barroso said in a statement on Tuesday (16 November).

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  • Mr Barroso said Britain and the Netherlands 'have shot themselves in the foot' (Photo: European Commission)

Without specifically naming Britain and the Netherlands, who were the most reluctant to give in to the MEPs demands, Mr Barroso said that "a small number of member states were not prepared to negotiate in a European spirit" and that a solution had been possible in the late hours of Monday night.

"Those who think they have won a victory over 'Brussels' have shot themselves in the foot. They should know that they have dealt a blow to people all over Europe and in the developing world," the Portuguese politician said, in reference to EU subsidies paid to farmers, businesses, regions and humanitarian assistance abroad.

The commission has now to come up with a new draft, with the parliament and member states each presenting their opinion and then talks will start all over again, a process "likely to take several months," according to EU budget commissioner Janusz Lewandowski.

Meanwhile, the EU will now employ a system of provisional budgets funded each month up with up to one twelth of the total 2010 figure.

Diplomats on Monday night pointed out that this will certainly cause "no drama" and that even for new projects, such as the European External Action Service or the three new financial supervisory authorities, there will be enough money left over.

Neither will the safety net for troubled eurozone countries be affected, a spokeswoman for Mr Barroso said Tuesday during a press conference. Pressure has mounted in recent days on the Irish government to ask help from the European Financial Stability Mechanism (EFSM), as its borrowing costs on the markets are reaching record highs every day.

"There is no impact of the absence of the budget for 2011 on the possible activation of the EFSM," the spokeswoman said.

Mr Lewandowski, however, maintains that the month-to-month budget scheme will jeopardise investments in poorer regions – under EU's cohesion policy - which need longer term planning and require co-funding from the public or private sector.

Poland, one of the big beneficiaries of cohesion policy, is the native country of Mr Lewandowski, himself a former MEP.

Speaking to the EUobserver, Guy Verhofstadt, the leader of the Liberal group in the European Parliament said that the uphill battle against reticent member states was not about money, but about "going back to the original formula of EU's founding fathers, who based the European budget on 'own resources'," he said, employing the term used in Brussels jargon for giving the bloc its own fundraising powers.

"This is an opportunity to open a discussion about the financing system of the EU – it should be direct financed by citizens, so that they can have a direct influence on EU policies," he argued.

Debt crises such as the Greek and the Irish ones could be averted, Mr Verhofstadt argued, if the current system of national contributions and rebates was abolished.

He dismissed British sovereignty concerns when it comes to taxation, arguing: "EU taxes exist already, on agricultural imports and part of the value added tax (VAT)."

In the Belgian politican's view, to talk about EU taxes at times of budget austerity in member states was not inappropriate, since the European Parliament was not asking "for extra taxes," but to replace some national taxes.

Mr Verhofstadt said that the group of reluctant countries has dropped from 12 mid-October to 3-4 on Monday night, "all the others were willing to start a discussion on it."

Meanwhile, speaking at a breakfast event in Brussels, EU Council President Herman Van Rompuy came to the defence of member states and pointed to the "political courage" governments have to muster when introducing painful austerity measures, despite street protests and "rising populism."

He spoke of the Lisbon Treaty as offering "new tools" on monetary stability, jobs and growth, but said that while discussions in Brussels are important, "the most difficult political work has to be done in the member states themselves."

"The choice is not between the 'intergovernmental' or the 'community method'," he said, referring to the two visions of how Europe should operate: on a national government-to-government basis or through EU-level institutions, "but between a co-ordinated EU position or nothing at all."

When asked about the 2011 budget, Mr Van Rompuy said that "in the end, compromise will be found."

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