EU to cut budget for first time in its history

Picture: Reuters
Picture: Reuters
Share this article
Have your say

EUROPEAN leaders have reached agreement on the first-ever cut in their common budget, in a landmark deal hailed as a victory by David Cameron.

After 24 hours of intense negotiations, the EU summit in Brussels broke up with an agreement that spending for 2014-20 would be €908 billion (£773bn) – €80bn lower than the original proposal on the table last November, when talks collapsed without agreement.

The Prime Minister said the budget for the rest of the decade would be €24bn lower than during the last seven-year period.

“I think the British public can be proud that we have cut the seven-year credit card limit for the European Union for the first time ever,” Mr Cameron said.

The budget deal was announced by the summit chairman, Herman van Rompuy, who declared on Twitter: “Deal done! European Council has agreed on MFF (Multi-annual Financial Framework) for the rest of the decade. Worth waiting for.”

The European Commission had pressed for a seven-year budget increase from the current €943bn for the financial period 2007-14 to €988bn

But hours of hard talking got that down to €908.4bn – an overall reduction in spending for 2014-20 of €35bn.

If a deal had failed this time, and the EU budget had to be frozen at 2012 levels until an agreement could be reached, the saving would have been less, at €24bn (£20bn).

What resulted was a “budget for growth”, boosting energy projects, research and development, while helping poorer states – all the while leaving the British budget rebate intact.

“Attempts to undermine the British rebate have been made again and again recently, on every side,” said Mr Cameron. “I have fought off these attempts and the rebate is safe.”

But he admitted Britain’s EU contributions would rise despite the budget cuts and the rebate, because, said the Prime Minister, former Labour PM Tony Blair gave away part of the rebate.

That, he said, included giving up the rebate on parts of the British payment going towards restructuring in poorer states.

That was one reason why it was important for Mr Cameron to cut the overall budget figure, because the lower the maximum, the lower any British increase would be.

Overall, said Mr Cameron, the accord was “good for Britain and for Europe too – good for taxpayers in Britain and Europe”.

The real-terms cut in the long-term budget was the first since the EU began preparing seven-year spending cycles, and he could “look people in the eye” and declare a good deal.

He warned MEPs who have the power to veto the budget to approve the package.

European Parliament president Martin Schulz has announced the parliament vote will be conducted by secret ballot to stop governments pressuring their MEPs to back the deal.

Mr Cameron said it was the job of elected politicians to be “open, transparent and accountable” in their democratic dealings, not least when deciding on spending taxpayers’ money.

It was not MEPs who were deciding spending, but national politicians in the EU club.

Asked about claims that he was isolated in Europe, Mr Cameron admitted he had been isolated when he alone rejected a treaty change at a summit 14 months ago – “but not now.”

Deputy Prime Minister Nick Clegg said he backed Mr Cameron, while acknowledging their differences on some EU issues.

“This is the right deal for Britain and for Europe,” he said. “It’s the best outcome for British taxpayers and people right across Europe.

“Every country in Europe is having to take tough decisions at home, and it is only right that in these difficult times the Euro­pean Union also cuts its cloth accordingly.”

Shadow foreign secretary Douglas Alexander commented: “We welcome news that a deal has been reached.”

And he added: “The EU had an opportunity to focus the budget on growth and jobs, and it will be a matter of deep regret if that was not achieved.”

Shadow chancellor Ed Balls: “At a time when taxes are being raised and services cut at home, it cannot be right that the EU budget should rise in line with inflation.

“We will need to look very closely at the detail … but if today’s deal does result in a genuine real-terms cut in the EU budget, then the Prime Minister will have delivered what Labour and Parliament demanded.”

Now the talking is over, who are the winners and losers?

Winners: UK, Germany, the Netherlands, Sweden, Finland and Denmark.

The alliance of northern European countries all are net contributors who wanted to see a cut in the European Union budget. All of them will pay more but they believed that, with austerity measures at home, the EU also had to cut its cloth.

Losers: France, Italy, Luxembourg, Belgium, Malta, Poland, Hungary, Czech Republic, Ireland, Spain, Greece, Portugal, Slovenia, Estonia, Latvia, Lithuania, Slovakia, Romania, Bulgaria, Cyprus and Austria.

France and Italy had wanted a new EU stimulus package, and agriculture spending will be reduced.

Other countries receive a net subsidy and had warned that a cut in the budget would hit their internal investment.

This mainly affected southern and eastern European countries, as well as Ireland, and means they will have to find more domestic cuts.

Man of steel didn’t blink through the long night

Negotiations among European leaders can and often become the political equivalent of an iron man contest, where endurance and a determination not to give up win the day.

So the crucial EU budget talks on Thursday night saw the various leaders try to tough it out beyond the traditional dinner, past midnight, into the wee small hours and beyond.

While Prime Minister David Cameron has been in the past described as a bit of a lightweight, who walked out of one set of EU talks with a sick note otherwise known as the UK veto, he was more of a man of steel this time around, according to sources.

Mr Cameron, unlike all other European leaders, refused to leave the commission’s Justus Lipsius building for a break all night.

Instead, fuelled by coffee from a new machine in the UK delegation room, he held talks with individual heads of government, sending UK officials off with streams of messages.

At one point, Mr Cameron teamed up with German chancellor Angela Merkel to search for French president François Hollande.

However, Mr Hollande, in a bit of a huff over the British-German alliance on cutting the EU budget, left Mr Cameron and Ms Merkel waiting for an hour before deigning to have a “brief” chat with them.

Mr Hollande also arrived at the talks late. He kept all the other leaders waiting for hours after most of them had arrived at 9am.

Most irritated were the Italians, who were his main allies for a bigger budget for an economic stimulus package.

Meanwhile, tough guy Mr Cameron was so hard that he did not even have a sofa to lie down on in the UK rooms. Instead, he just took a brief sleep on a chair before re-entering the fray around 3am.

Officials were constantly carrying notes between different governments, along with endless cups of coffee, with many diverting to the enclosed press room, where they gave the latest off-the-record updates on progress.

It was a night of haggling at the EU summit described by one official as “like a bazaar”.

Finally, at 6am, the commission president, José Manuel Barroso, and European Council president Herman van Rompuy offered to cut the budget to €908 billion.

At last, the leaders could go to sleep while officials remained up to hammer out final details, allowing a far easier set of talks on Friday afternoon, when a compromise was reached.