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EU Budget cut for first time ever!

Good, why should the EU increase budgets as all else have to cut back.

As Cameron points out, the UK contribution does rise, but not by as much as it would have now the overall budget is being reduced. The UK is one of the stronger economies in the EU, so expects to pay.
 
Giz said:
European leaders have agreed to the first-ever reduction in the European Union’s budget, in a significant diplomatic victory for David Cameron.
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Yes, a victory for him but not his alone - for example Netherlands, Denmark and Sweden were for cuts and Germany turned behind them too.

At 960 billion euros the agreed budged is a bit smalled than Rompuy's proposal, and will be 1.00% of GNI of the 28 member countries (Croatia will join in July 2013). But European Parliament has to accept it first, and some groups have already vowed to vote against it.

Here's the budget deal: EUROPEAN COUNCIL 7/8 FEBRUARY 2013 CONCLUSIONS (MULTIANNUAL FINANCIAL FRAMEWORK)
And most important key points in the Summary of the European Council agreement

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Giz said:
Amazing - Cameron actually got the EU to apply its austerity prescription to itself! (The UK will still probably end up paying more but hey, you gotta start somewhere!)
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Heh, gotta love the reduction to CAP and this part:
HEADING 5 - ADMINISTRATION

The need to consolidate public finances in short, medium and long term requires a particular effort by every public administration and its staff to improve efficiency, effectiveness and adjust to the changing economic context.
...
These ceilings include the effects of the following savings:
• a reduction applied to all EU institutions, bodies, agencies and their administrations of 5% in the staff over the period 2013-2017. This shall be compensated by an increase in working hours for staff without salary adjustment. [:D]
• reductions in non-staff related expenditure, further reforms of the Staff Regulation and other internal administrative measures.
• As part of the reform of the Staff Regulation, the adjustment of salaries and pensions of all staff through the salary method will be suspended for two years.
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Have to say I liked Rompuy's proposal more with more funding to science, but all in all the budget looks like a good compromise, and even in the midst of various reductions the funding for science still actually increased.

Besides cutting CAP and forcing savings in administration I like the following things:
  • Funding for ERASMUS For All will grow 31%(Yay,shaggy times for EU students!:p)
  • Funding for science, technology and innovation will grow with Horizon 2020 program (though not as much as in previous proposal)
  • Satnav system Galileo got 6300 M€ (just a small cut from prev.proposal)
  • Experimental fusion reactor ITER got 2707 M€ (no cut)
  • The European Earth observation programme Copernicus/GMES got 3786 M€ (a big cut from prev.proposal, but better that nothing i guess)
 
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After the 26 hour negotiations and further cuts everybody seems to be more or less happy with the new budget and calling it a good result. The further reductions are actually small compared to Rompuy's earlier proposal, but they did hit proposed funding for science and research (yet the science funding still increased from 2007-13 budget).

In the great scheme of things the whole battle over small savings appears kind of pointless - wrestling over savings of a billion here and there divided between 28 members over a period of 7 years. The budget is only 1% of EU's GNI, and the net contributions of rich countries are about 0.2%-0.3% of their GDP.

Compared to the whole the further reductions made are small, but may cripple some important programs. Funding for Horizon 2020 was cut by about €9 bn (12%) from almost €80 bn to little over €70.3 bn (htough there's no official breakdown yet available). Still, even with the further cuts it's a lot more to science than in 2007-13 budget.


After the 26 hour wrestle just about everybody seems to claim various victories all over. So what did they achieve and how were different national interests met?

Some of the reactions.

UK:
Cameron says he got to keep UK's rebate untouched and with further budget cuts he touts the result as "good deal for Britain" and a victory, which it is. But actually UK's net contribution will likely rise, as for some other rich countries. And when touting the savings as a victory he did not mention the cuts made to science funding to get those savings.

Germany:
As usual Merkel got just what she wanted from the beginning: a budget 1% of GNI. "In my opinion this is a good deal and it is important."

France:
The cuts into France's milk cow CAP must have hurt, but even Hollande has found a silver lining: savings of €140m a year on France's financing of rebates.

Spain:
Rajoy called it a very good deal for Spain, which it indeed is. Spain will be a net recipient for 2014-20, and will get a big share of the new youth unemployment fund.

Italy:
Monti called it a big improvement for Italy's position as a net contributor: savings of €600 m a year on it's financing of various rebates, and €3.5 bn of extra funding for Italy.

Austria:
Chancellor Faymann called it "presentable". Austria got a modest rebate, which will be phased out by 2016.

Denmark:
Got goals it wanted including an annual rebate of €130 m.

Sweden:
Sweden's net contribution will drop a little.

And the Biggest Winner?
Poland will get billions and billions. With a net of about €76 billion Polish PM Tusk called it a "a huge success" and "one of the happiest days of my life". :cool:


And the biggest gripes?
European Parliament. From their POV about €50 bn is missing from the proposed budget and funding for programmes is endangered. Will be interesting to see if they eventually accept it.
 
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More austerity for austerity ravished Europe. Because why learn from your mistakes?
 
^ Cameron was just a part of it all, and his personal victory speech was an overstatement ment for domestic political consumption. It's always the case in all countries after budget negotiations, everybody goes home appearing victorious no matter what.

In fact all northern countries were going for cuts and savings (the "1% league") and many even for national rebates. There was Germany, Netherlands, Austria, Denmark, Sweden, Finland, UK etc. So it never was UK alone. And it all hinged around Germany. Merkel got just what she had wanted from the beginning: a budget 1% of EU's GNI.

So it's not really just Cameron's merit or fault (depending on POV). But it's very good that Cameron could go home and claim a victory: good for Cameron, good for UK, and good for EU. By appearing victorious and touting the "good deal for UK" thing he could calm the loudest domestic antieuropean sentiments a bit. And as a bonus he got silly public reactions from antieuropean UKIP:
Nigel Farage MEP , the leader of Ukip dismissed the deal. "This is a dud deal which is already out of date because the debate in Britain has moved on from EU reform to EU exit," he said.
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Peephole said:
More austerity for austerity ravished Europe. Because why learn from your mistakes?
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The nice thing about EU budget is that it always has something for everyone: something for it's critics and something for it's praisers. From your POV it represents austerity and you're correct, it does have such features. Yet it's not all to it. It also has added support for countries that have suffered most from economic turndown.

For one example there's a new €6 bn youth employment program for most seriously affected regions:
YOUTH EMPLOYMENT INITIATIVE

59. On several occasions the European Council stressed that the highest priority should be given to promoting youth employment. It devoted a special meeting to this theme in January 2012 and gave it a strong emphasis in the Compact for Jobs and Growth. It expects the Council to adopt soon the recommendation on a Youth Guarantee. It invites the Commission to finalise the quality framework for traineeships, to establish the Alliance for Apprenticeships and to make proposals for the new EURES regulation in the coming weeks. The EU budget should be mobilised in support to these efforts. Recognising the particularly difficult situation of young people in certain regions, the European Council has decided to create a Youth Employment Initiative to add to and reinforce the very considerable support already provided through the EU structural funds. The Initiative will be open to all regions (NUTS level 2) with levels of youth unemployment above 25%. It will act in support of measures set out in the youth employment package proposed by the Commission in December 2012 and in particular to support the Youth Guarantee following its adoption. The support for the Initiative will be EUR 6 000 million for the period 2014-2020.
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And for most seriously impacted countries there's added support as special allocations from Structural Funds, in addition to the normal funding:
Other special allocation provisions

50. A number of Member States have been particularly affected by the economic crisis within the euro-area which has had a direct impact on their level of prosperity. To address this situation and in order to boost growth and job creation in these Member States, the Structural Funds will provide the following additional allocations: EUR 1.375 bn for the more developed regions of Greece, EUR 1.0 bln for Portugal, distributed as follows : EUR 450 million for more developed regions of which EUR 150 million for Madeira, EUR 75 million for transition region and EUR 475 million for the less developed regions, EUR 100 million for the Border, Midland and Western region of Ireland, EUR 1.824 bn for Spain, out of which EUR 500 million for Extremadura and EUR 1.5 bn for the less developed regions of Italy, out of which EUR 500 million for non-urban areas.

51. In order to recognise the challenges posed by the situation of islands Member States and the remoteness of certain parts of the European Union, Malta and Cyprus shall receive, after the application of point 48, an additional envelope of EUR 200 million and EUR 150 million respectively under the "Investment for growth and jobs" goal and distributed as follows: one third for the Cohesion Fund and two thirds for the Structural Funds. Ceuta and Melilla shall be allocated an additional envelope of EUR 50 million under the Structural Funds. The outermost region of Mayotte shall be allocated a total envelope of EUR 200 million under the Structural Funds.
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And there's a Review Clause which gives a provision for further €4 bn if needed.

And there's €2.5 bn allocated as aid for the most deprived people ("food aid").

(sources: Summary of the European Council agreement and Conclusions of the European Council)

So it's not by all means all austerity. I did like Van Rompuy's proposal a lot more, but all in all I'd say the budget is a pretty good compromise, and has something for everyone.


Yet I do hope that the European Parliament votes it down. And this time it seems quite possible to happen. That would be so cool. :)
 
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icerat said:
Those "children" are in the unemployment queues right now.
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I was referring to the next generation and they need not join the unemployment queues because the government will be using their money to service the debt that we are creating.

icerat said:
Jobs are what are needed, not more austerity.
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There are casinos in Monte-Carlo that offer better odds of that happening.
 
psionl0 said:
Yeah! Don't they realize that there are children who will be able to service the ever growing debt?
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EU budget hasn't much to do with "ever growing debt". EU budget is peanuts. For some perspective:

EU budget is only 1 % of EU's GNI. Compare that to national budgets, which can go up to 50% of national income, while the net contributions to EU budget amount to only about 0.2%-0.3% of GDP.

And the cuts made represent about 0.035% of EU's GNI. Yeah, that will have a huge impact on "ever growing debt" in the national budgets.

When one looks at the numbers the rhetoric that we have to cut EU budget to stop the "ever growing debt" is not economical argument at all, it's ideological and political: first you make a mountain out of a molehill, then you spend 26 hours climbing it, and then you go home to tout about how victorious you have been. Except that everybody can see from the numbers how high a molehill it actually was.

And the funny thing is that after making the cuts there's now over €50 bn missing from the budget. Which means that somewhere on the road around 2016-17 more money will be needed to cover the "austerity" gap in funding. "What me worry", says the austerity hawk, "it's for the next government to deal with."

Add to that the fact that compared to Van Rompuy's proposal the biggest cuts were made to programs that are supposed to promote competitiveness and growth in the long run: Europe 2020, Horizon 2020, Connecting Europe Facility - i.e. research, technology, innovation and critical infrastructure. "How do I austerity".

Yet OTOH the funding for very same things got a substantial 37% increase compared to 2004-13 budget. And CAP (Common Agriculture Policy) got cut compared to previous budget, though not as much as it was cut in Van Rompuy's proposal.

So the recipy for the additional savings of 0.035% was: take a sane proposal for budget, cut funding from growth policies, add funding for farm subsidies. Thanks, austerity hawks. Thants.
 
psionl0 said:
If the EU budget is so negligible then how could cutting it cause so much austerity?
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It doesn't cause much austerity nor "ever growing debt". You wouldn't believe that when reading about the victory speeches by austerity hawks. But it really is making a mountain out of a molehill - small savings compared to the whole or to the national spendings. It's more about ideology and politics than money.

And as a compromise the budget is not bad. And it's all well that austerity hawks are feeling (out-of-proportion) triumphant over it.

BUT in the midst of all national pettiness it would have been much much more important to concentrate on more of a structural changes: more phasing out CAP and cutting inefficiencies from regional cohesion funding. They both were cut somewhat compared to the previous budget, but they were even smaller in the proposal and were rather counterintuively increased in the negotiations for the shiny austerity thingies.

At the same time the cuts into Europe 2020, Horizon 2020, and Connecting Europe Facility will somewhat hurt the programs. Or to put it more precisely: their funding was increased but not as generously as in proposal - instead of €80bn science&research got €70bn etc. Could have been better but not bad, I'd say.

The process happened as usual. The European Council is the place where national elected leaders fight negotiate hard for their national interests. They make the proposal for the budget and it always happens the same way: no consensus at sight after the first rounds, media writes how everything seems to be totes lost forever now, and then a compromise at the last fight negotiation. Then everybody goes home and claims a victory. It's all very entertaining.

This time there's a new twist in the plot. This time the European Parliament is seriously opposed of the proposed budget. It's quite possible that they will not rubber stamp it but vote it down. I say do it. :p
 
spin0 said:
By appearing victorious and touting the "good deal for UK" thing he could calm the loudest domestic antieuropean sentiments a bit.
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Anti-European sentiments that he himself has been encouraging.
spin0 said:
So it's not by all means all austerity. I did like Van Rompuy's proposal a lot more, but all in all I'd say the budget is a pretty good compromise, and has something for everyone.
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Shifting some money around might be nice, but it's still just shifting money around, while the budget as a whole injects another dose of austerity in the European economy. Sure, the European budget is tiny. But it all adds up.
psionl0 said:
Yeah! Don't they realize that there are children who will be able to service the ever growing debt?
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No, combined government debt in the European Union is pretty stable at an 85%. Plus, austerity in a depressed economy is largely self-defeating so it'll likely make the "debt burden" worse, not better.
psionl0 said:
I was referring to the next generation and they need not join the unemployment queues because the government will be using their money to service the debt that we are creating.
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Government debt is increasing because of the economic decline. When a country's economy shrinks, its debt burden becomes larger, because the debt burden is relative to the size of the economy. An economy shrinking also means rising unemployment and declining profits for companies, resulting in much lower tax revenues for the government. Rising unemployment also necessitates higher spending in the form of unemployment benefits, medical costs and early retirements, further worsening the balance sheet.
 
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The European Parliament just rejected #EUbudget 2014-2020. Resolution on rejecting Council position was adopted with votes 506 in favour, 161 against and 23 abstentions.

EP has grown balls after Treaty of Lissabon.
 
Puppycow said:
So what happens next?
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There will be negotiations with the Council and very likely a compromise possibly even before summer. In the unlikely event that no agreement is reached by beginning of 2014 then the 2013 budget ceilings would continue to apply - I don't think anyone really wants that.

Basically EP's negotiation stance is not so much about ceilings but flexibility: Long-term EU budget negotiations: EP sets out its stance

I think a pretty good compromise would be to grow 2013 ceilings a bit to address the payment shortfalls issues in the current budget, to add flexibility to the 2014-20 budget while keeping the commitment ceilings, and to settle a date when the budget will be reopened for possible adjustments to reflect economic developments.

I very much like EP's ballsy decision. Not so much in the hopes that the budget ceilings would grow, but because this turn of things is good for democracy on many levels.

EP used to be seen as a sort of a discussion forum without real power. Lisbon treaty changed that. And now EP flexed it's new muscles to demonstrate that power with an overwhelming majority.


ETA: Here's a good overview: EU lawmakers reject $1.3tn budget proposal
 
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