http://www.businessweek.com/news/2012-11-27/van-rompuy-presses-eu-parliament-to-back-cut-in-budget

Bloomberg News

Van Rompuy Presses EU Parliament to Back Cut in Budget

November 27, 2012

European Union President Herman Van Rompuy urged EU lawmakers to accept a smaller seven-year budget for the bloc, highlighting the limits set by a U.K.-led group of opponents of greater expenditure.

As countries in Europe cut their own spending to tackle the debt crisis, Van Rompuy told the European Parliament the veto power that each of the 27 national leaders in the EU wields over the bloc’s 2014-2020 budget plan necessitates a reduction compared with the 2007-2013 period.

“The need for unanimity constrains the possible outcomes,” he said to members of the EU assembly today in Brussels. “We must work on a moderation budget. The times call for it.”

Van Rompuy is seeking to win over European lawmakers for the first shrinking of the EU’s “Multiannual Financial Framework” while searching for an agreement among national leaders, who deadlocked on the matter at a two-day meeting last week. EU Parliament members have criticized proposals to cut European expenditure, saying it is a collective investment tool that becomes more important during a time of national austerity.

The EU’s seven-year budget guidelines, traditionally a tussle between richer nations that are net contributors and poorer countries mainly in eastern and southern Europe, are a gauge of the bloc’s political mood and coherence. Regional and agricultural aid soaks up around four-fifths of EU expenditure, funding everything from transport networks to farmers’ incomes.

Added Significance

The sparring over 2014-2020 European spending has taken on added significance as the region seeks to contain a three-year- old debt crisis threatening to break up the 17-nation euro.

National governments finance 70 percent (EUGNEMUQ:US) of the EU budget, which totals 994 billion euros ($1.28 trillion) in 2007-2013. The European Commission, the EU’s executive arm, had proposed a 4 percent boost to 1.03 trillion euros in 2014-2020.

The richest EU countries including the U.K. and Germany oppose an increase, saying it would be inconsistent with efforts by national governments to narrow their budget deficits. That prompted Van Rompuy to recommend a reduction to 973 billion euros in 2014-2020 in the run-up to last week’s summit of national leaders.

That amount was still too much for financially stronger countries that pressed for another 30 billion euros in cuts. The Nov. 22-23 meeting ended with Van Rompuy saying he would organize another summit early next year in a bid to strike an accord among the national leaders.

“An agreement is difficult, but necessary,” Van Rompuy said today in the EU Parliament, which must also approve the 2014-2020 budget. “It will require more time.”

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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