Money Talks

Friday 28 September 2012 21.37

By RTÉ Europe Correspondent Paul Cunningham

It’s budget time in Brussels – drafting a trillion euro financial plan for the years 2014 to 2020. EU leaders want agreement by November, and so decision time looms.

The EU budget is of particular importance to Irish ministers this time round.

That’s because Ireland will hold the Presidency of the European Council from January next year.

If the budget isn’t agreed in November, our ministers will be expected to negotiate a compromise financial plan in 2013.

Even if an agreement is reached by the November deadline, Irish ministers will have to steer the detail of the budget through the European Parliament.

The EU budget holds the rather unwieldy title of a “Multiannual Financial Framework.”

Not surprisingly, it’s spawned yet another Brussels acronym: “the MFF”.

EU leaders are scheduled to meet at a special summit in Brussels on 22 and 23 November, which is focused on finalising the size of the MFF and what broad headings will receive what resources.

However, senior EU officials have warned that intense efforts to reach agreement are proving difficult.

Asked how talks were proceeding, one source told RTÉ News that progress was being made “but at a painfully slow pace”.

One problem is the size of the budget. The European Commission has proposed an overall package of €1,033bn for 2014-2020. However, some countries feel that’s too large.

Britain has been blunt and argued that this should be reduced by at least 10% – shaving off more than €100b.

The Commission counters that its proposed budget amounts to only about 1% of Europe’s income.

It’s received support from Portugal and other states. Yet Germany, Finland, Sweden and the Netherlands formed a new group this year called “Friends of Better Spending” and one of their central aims was, and remains, to reduce the size of the budget.

Ireland is broadly in favour of the Commission’s proposed budget.

That’s because the Government fears that if the budget is reduced, then there will be less money for key areas such as the Common Agricultural Policy, or CAP.

At this moment in time, it seems quite possible that the budget will be reduced. If that was to happen, two questions arise: How much will the overall budget be reduced by? Will any sector Ireland is interested in – e.g. the CAP – lose out badly?

Irish diplomats, ministers and ultimately the Taoiseach will argue that the Commission’s proposal is about delivering economic growth and that is the single most important target at this time of financial difficulty.

EU budgetary policy, they will say, needs to reflect both the political priorities and commitments which have already been given by EU leaders.

Any gap between word and deed will only feed uncertainty into the financial markets and wreck havoc.

In all of this, it’s worth remembering that Ireland remains a net beneficiary from its membership of the European Union.

In other words, despite being a member since 1973 we still receive more money from the EU than we pay in.

Between 1973 and 2007, Ireland contributed €20bn to the EU budget but received a total of €60bn. While the scale of what we receive has reduced significantly over the decades, we still take more out of the EU kitty than we contribute.

Over the course of the last MFF, Ireland received €12.3bn from the CAP.

The European Commission has produced a 48-page budget outline, which is available on its website www.consilium.europa.eu/special-reports/mff

It provides a good overview on how the budget is going to be framed.

A quick flick through it and you will realise pretty quickly that the document contains X’s where one would expect to find figures.

That’s what negotiators from Cyprus, which currently holds the Presidency of the European Council, are trying to fill in.

Towards the end of October, the man who chairs EU leaders’ summits, Herman Van Rompuy, will take over the budget negotiations from the Cypriot delegation. In early November, Prime Ministers and Presidents from the 27-member EU, including Enda Kenny, will troop over to Brussels to meet Van Rompuy one-to-one.

His aim will be to see whether differences between the countries can be narrowed.

When the summit actually takes place, Mr Van Rompuy will give the leaders his compromise proposal. Lengthy negotiations will then ensue.

Ireland’s Enda Kenny will be trying to forge alliances with other like-minded leaders. For example when it comes to protecting the CAP from cuts, France would be one of Ireland’s staunchest allies.

In the past few days, the Cypriots said they felt “encouraged” to proceed with their negotiating plan.

During a recent trip to Brussels, Tánaiste Eamon Gilmore opined that while substantial differences remain, he felt it wasn’t “unrealistic” to believe that agreement could be secured in November.

Yet even if EU leaders reach agreement on the MFF, this does not mean the budget will be passed. The European Parliament has secured enhanced powers under the Lisbon Treaty and it’s an institution which is increasingly flexing its muscles.

On the MFF, the Parliament has to give its consent to what EU leaders finally agree. If MEPs do not consent, then the MFF, as proposed, cannot become law.

For this reason, the European Parliament has been kept very much in the loop as the MFF negotiations have continued. Mr Van Rompuy will not want to secure a deal with the EU leaders which then falls in the European Parliament.

Even if the MFF is passed by Parliament, there is a second stage of negotiation. While EU leaders effectively determine the size of the budget, and what monies will be spent under broad headings, they leave the nitty-gritty to be negotiated by others.

Over 2013, MEPs and Council officials will examine more than 70 specified areas – like justice, environment and agriculture – and decide precisely which allocations are given under every sub-heading.

Under the Lisbon Treaty, MEPs have the power of co-decision. In other words, if they don’t agree – it does not happen.

Then again, the Parliament would look stupid if it gave consent to the overall budget and then tried to block it coming into law due to a row over one or two sectors.

If, as expected, the MFF is passed – it’s game on for the Irish ministers.

When it comes to securing agreement in sectoral areas, they will be lead negotiators during the Irish six-month Presidency.

Accordingly, Agriculture Food and Marine Minister Simon Coveney will have his work cut out for him given the importance of CAP.

Others who will face challenges include Transport Minister Leo Varadkar; Communications Minister Pat Rabbitte; and of course Tánaiste and Foreign Affairs Minister Gilmore.

There are plenty of other issues which could cause problems. One of the most controversial subjects is known as ‘the rebate.’

While several countries have a rebate, it’s most closely associated with Britain due to former Prime Minister Margaret Thatcher.

A rebate simply means that certain countries feel they put money into the EU budget which, due to imbalances in the way the budget is constructed, or the importance given to farming, means they effectively lose out compared to other member states.

Accordingly they seek a repayment from Brussels. Under the current budget, Britain is reimbursed 66% of the difference between its contribution to the EU budget and the amount it receives back from the budget.

Last year, that amounted to €3.6bn.

Will their rebate be lowered this time around? That will be an acid-test for David Cameron, who knows there would be a storm of protest back home if he lost out at the Brussels negotiating table.

Denmark has traditionally opposed rebates. This time the Danes are reported to be reconsidering their position. It’s understood their view is this: if the rebate is set to stay, then Denmark should get a rebate too.

If Denmark gets a rebate – could that reduce Britain’s rebate? Mr Cameron is expected to come under significant pressure on the rebate issue.

Other budget issues could cause problems. They are outside the MFF and, well, that’s the problem.

One example is called ‘Crisis Instruments’, a multi-billion euro budget-line which was established to help countries afflicted by natural disasters.

Should this be included in the MFF? Another is the Globalisation Fund, which former workers from the Irish divisions of Dell and SR Technics benefited from. Should this continue to stay outside the MFF?

So that’s the plan. The problem is that the whole summit could be blown-off course. The ongoing eurozone crisis means anything could happen. Spain is – if the experts are to be believed – inching towards a bailout.

That’s on top of the €100bn credit line already offered to bolster Spanish banks.

If the Madrid government requested a bailout in early November, then the plans for a solely MFF dominated summit would disappear. And that’s just one of the landmines which could detonate unexpectedly.

A quote springs to mind which is attributed to former British prime minister Harold MacMillen.

Reputedly responding to a journalist’s question about what he feared the most, MacMillan is said to have quipped: “Events, dear boy, events”.

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