MEPs Reject EU Budget Agreement

by Ulrika Lomas, Tax-News.com, Brussels

16 January 2006

The European Parliament's Budget Committee has unanimously rejected the agreement reached on the EU's 2007-2013 budget by heads of government in December as MEPs criticised the level of provisions agreed by the summit.

The Budget Committee approved a report by German Christian Democrat Reimer Böge, which rejects the leaders' position on the future budget "in its current form because it does not guarantee an EU budget enhancing prosperity, competitiveness, solidarity and cohesion in the future".

MEPs will vote on the report January 18 during the plenary session.

Most of the MEPs welcomed the fact that government leaders had eventually reached an accord, but criticised ministers for taking so long to reach an agreement, as well as the content of the accord.

They were particularly critical of the EUR862 billion (1.045% of gross national income) in funding agreed by the summit, which compares unfavourably with the EUR975 billion (1.18% of GNI) proposed by the Parliament in June.

Nevertheless, MEPs said that they are eager to get into negotiations so that a solution can be reached.

"We are not happy...but we are happy to talk," commented Alain Lamassoure, French MEP for the European People's Party.

However, the Böge report makes it a necessary pre-condition for negotiations that the Austrian Presidency has a "real negotiating mandate".

Talks could begin next week when Parliament President Josep Borrell, Commission President José Barroso and Austrian Chancellor Wolfgang Schüssel meet during the Parliament's plenary session in Strasbourg.

EU leaders eventually agreed the next seven-year EU budget in the early hours of December 17, with both the UK and Germany giving up money to go towards development support in the 10 new member states, including Cyprus and Malta.

One of the major stumbling blocks was the UK's reluctance to concede its budget rebate, and France's reticence to give up farm subsidies under the Common Agricultural Policy.

The lengthy discussions which led to the agreement have prompted many senior figures within the EU to call for a comprehensive overhaul of the bloc's funding mechanism, with some, including Internal Affairs Commissioner Joaquin Almunia advocating an EU-wide tax. Commission president Manuel Barroso has also hinted that he supports a move towards a single levy to break the link between national budgets and the European budget.

The Commission is set to review the European budget by 2008/9 and Barroso indicated that no options will be left off the table in its attempt to streamline the process. “We are going to look at it without taboos,” he has stated.

Austrian chancellor Wolfgang Schussel, who now holds the rotating six-month presidency of the European Union, has also warned that the EU risks "killing itself" if no solution to the budget impasse can be found.

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