24th Oct 2016

EU budget in disarray after MEPs veto talks

EU spending plans for 2012 and 2013 are in disarray after talks between ministers and MEPs collapsed on Tuesday (13 November).

With eight EU countries unwilling to agree to the European Commission's demand for an extra €9 billion to cover outstanding bills for this year, MEPs boycotted talks which had been intended to agree a budget for 2013 worth around €130 billion.

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After negotiations broke up last Friday, talks were expected to resume at 7pm Brussels time on Tuesday with a view to concluding a deal by a midnight deadline.

However, with no agreement in sight on how to fill the €9 billion gap, European Parliament chief Martin Schultz told ministers that MEPs would not attend and were "prepared to refuse a compromise" if their demands were not met.

Since no budget deal can be agreed without the consent of parliament, the move will force the commission to present a new budget proposal for 2013.

If no agreement is reached ultimately, EU spending in 2013 will have to be approved on a month-by-month basis, on the grounds of a two percent inflationary rise, putting pressure on the EU countries demanding a budget freeze to agree a compromise.

MEPs have supported the commission's wish to pass a budget worth €138 billion, a 6.8 percent increase compared to 2012. Most member states, however, are insisting on €5 billion less.

Alain Lamassoure, the French centre-right deputy who chairs the parliament's budget committee, said in a statement that "given the current impossibility in which member states find themselves to solve the problem of the outstanding balance, the European Parliament cannot continue negotiations on next year's budget."

Ministers hit back, with Cypriot EU affairs minister, Andreas Mavroyiannis, accusing parliament of taking the budget “as a hostage." He added that the log-jam "augurs ill for the negotiations" on other parts of the budget.

In October, the commission tabled an emergency proposal claiming that it needed an additional €9 billion to cover unpaid bills from projects completed earlier in the budgetary cycle.

EU budgets invariably include a sizeable discrepancy between "committed funds" and actual spending. MEPs joined with the EU executive in criticising member states for agreeing to programmes and then refusing to pay for them.

Flagship EU policies including the Erasmus scheme, which places students at other European universities, and the European Social Fund are understood to be within weeks of a cash-flow crisis.

Despite the collapse of negotiations, politicians confirmed that €670 million would be paid to the Italian regions affected by a series of earthquakes earlier in the year.

Lamassoure said that the budget committee would vote on the aid package Thursday (15 November), with the deal being ratified in Strasbourg next week.

But the impasse is causing rising concern among diplomats that next week's EU summit to discuss the seven year budgetary framework, worth €1 trillion, will also end in failure.

A clear divide is opening up between a group of countries led by the UK, who want to freeze EU spending, and others who want an increase.

At a set piece event in the European Parliament on Tuesday (13 November), Polish Prime Minister Donald Tusk led a group of 15 member states demanding an increase in cohesion funds aimed at Europe's poorest regions.

'We are all here because we understand that cohesion policy equals growth and creation of jobs," said Tusk.

Ceta failure deepens EU trade crisis

Canada said on Friday that the free-trade agreement with the EU had failed and that the bloc was "not capable" of concluding agreements.

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