EU approves first ever spending cut

BOWING to pressure from austerity-hit member states, the European Union’s parliament has finally approved the first spending cut in the history of the 28-nation group.

Over two years of haggling ended yesterday when the EU legislature approved the budget. Picture: AP
Over two years of haggling ended yesterday when the EU legislature approved the budget. Picture: AP

Over two years of haggling ended yesterday when the EU legislature approved the budget, which will fall to €960 billion (£806.3bn), from €975bn, for the seven years between 2014 and 2020. The cut had been sought by several member countries, led by the UK, which wanted to see austerity at EU level at a time when many were pursuing cutbacks at home.

EU president Herman Van Rompuy called the spending commitments “a realistic budget for Europe” which has been struggling through years of financial crisis.

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The budget fell some €40 billion short of the first proposals of the EU, which had wanted more financial clout to push through investment and employment programmes.

Britain had been first in line to hammer home the message that the EU should limit spending, if only to contain its ambitions to encroach on national policies.

“The difficult budgetary situation in the member states has resulted for the first time in a lower budget,” said former Belgian prime minister Jean-Luc Dehaene, who negotiated the deal for the parliament.

“This is especially problematic as in times of national austerity the EU budget should be higher to compensate for declining investments in the member states.”

The meeting approved the budget by 537 votes to 126, with 19 abstentions. The member states only need to reconfirm the agreement in the coming weeks, which is not expected to pose any problem.

Also yesterday, the EU’s highest court ruled that the member states were within their rights to block automatic pay increases for EU officials in 2011 amounting to 1.7 per cent.

The European Court of Justice ruled that EU nations were within their rights to consider the economic downturn sufficed to block the increase.

Again, Britain was happy to applaud the ruling.

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“When governments and families across Europe are taking difficult decisions to make savings, it would be wrong and irresponsible for the EU to not show similar restraint,” said Treasury minister Nicky Morgan.

The case highlighted the years-long dispute between some European capitals and the commission over what critics have dubbed the “Brussels gravy-train”.

Under the current rules, EU salaries move in line with the average earnings of civil servants in the member states, but lag them by a year. That meant EU staff were due a rise in 2011, just as some national officials were suffering cuts.

The only way to block an automatic rise is if there is a “serious and sudden deterioration in the economic and social situation within the EU,” the European Court of Justice said in its ruling.

It was up to the Council of Ministers – not the Commission – to decide whether the economic situation warranted blocking the automatic pay rise, the court said.

The new rules come into effect at the start of the EU’s next seven-year budget period, beginning on 1 January, 2014.