*UPDATED* EU leaders agree a budget for 2007-2013

EU summit - December 2005

After 17 hours of negotiations at the EU Summit on 15-16 December 2005, the UK managed to get a political agreement from all Member States on the EU budget for the period 2007-2013.

The European Commission had put forward an ambitious budget proposal based on 1.14 % of Europe’s GDP. But in June 2005 EU leaders were unable to find agreement with sharp divisions between the net contributors to the EU budget and some of the new Member States. The UK and a number of countries had blocked a compromise proposal from the Luxembourg Presidency budget which represented 1.06 % of total EU income.

EU leaders began the summit knowing that failure to reach agreement would have ended the year on a low note for Europe after the public rejection of the Constitutional Treaty in France and the Netherlands.

In this round of talks, London put forward an initial proposal for just 1.03 % of GDP which was refused by new Member States which would have seen a large cut in their financial support. As the negotiations continued, a second proposal of 1.04 % was revised upward to the final figure of 1.045 % of GDP.

It should be noted that the percentage of European GDP that will be transferred to the EU budget in the years 2007-13 is lower in the Europe of 25 than it was in the Europe of 15 a decade ago!

The elements that caused controversy in the debate were:
 The overall budget ceiling for the 2007-13 financial cycle;
 The amount and speed of modernisation funds for the eight eastern European newcomers and financial adjustments for other states;
 The UK rebate (representing 3-4 billion Euros per year) which was negotiated in 1984 when Britain was in economic decline;
 The willingness of France to allow a meaningful review of farm subsidies in 2008-09 which might produce further cuts before 2013.

The compromise agreement that was agreed contains the following elements:
 The overall budget is capped at 1.045 % of GDP which is expected to be €862.4 billion
 the UK will give up €10.5 billion of its rebate;
 the Netherlands has received a 1 billion Euro reduction
 Poland will be the largest beneficiary of EU cohesion spending, €59.7 billion,
 The European Commission is asked to hold a "full and wide-ranging" review of all EU spending, including the Common Agricultural Policy and the British rebate, and to draw up a report in 2008/9. EU governments will be able to take decisions on all subjects covered by the review - but will also be able to wield their veto.

However, there will be no extra money for Bulgaria and Romania once they join in 2007 or 2008, so the budget will have to be stretched to cover 27 states rather than 25.

Disappointingly, the amount of money allocated to budget Heading 3b which includes health and consumer policy, youth, culture and dialogue with citizens will be set at just 1 % above 2004 levels and then frozen for the entire budget period. This means 520 million Euros every year which will not be adjusted for inflation. It is highly likely that the proposed new Health and Consumer programmes will have their planned budgets slashed as they pass through the co-decision process over the coming months. All of the other budget headings except agriculture receive significant increases of up to 15 %. At a time when EU leaders are having to undertake a ’period of reflection’ because of their failure to engage citizens in the EU process, it seems counterproductive to reduce the one budget heading that makes a difference to individual people’ s lives and will encourage citizen participation in the EU.

Agreement on the budget meant that EU leaders could approve official EU candidate status for the Former Yugoslav Republic of Macedonia (FYROM). This does not automatically mean the opening of accession talks, EU countries noted that the Union’s own "absorption capacity" would be a factor in deciding the next steps for membership. Croatia and Turkey were officially named as EU candidate countries in October 2005.

 More information on the EU budget and how the money is spent.

A clear No from the European Parliament

The European Parliament has overwhelmingly adopted on the 18 January 2006, a resolution rejecting the Council agreement.

The resolution (adopted by 541 MEPs, 56 against and 76 abstentions) was put forward by the Budget Committee and Mr Reime Böge (EPP-DE DE) and states that the European Parliament has to be involved in talks over the revision of the EU budget. Furthermore, MEPs consider that the current deal will not fulfill commitments toward improving prosperity, competitiveness, solidarity, cohesion and security and will not develop the European added-value for citizens.

It should be noted that the European Parliament managed to negotiate an extra 4 billion Euros in 1999 when the previous financial agreement was reached.

EPHA and the health community advocated actively in the past weeks to improve the EU Budget and support Reimer Böge’s resolution.

The negotiations of the Interinstitutional agreement

A final agreement from the three EU institutions (the European Parliament, the European Commission and the European Council, "the Trialogue") must be reached on the Financial perspectives. Therefore, the European Commission has proposed a base for negotiations, called the "Inter-Institutional Agreement on budgetary discipline and improvement of budgetary procedure (IIA)". The IIA is meant to establish rules and mechanisms for the management of the EU budget over 7 years. Without an agreement between the Council, the European Parliament and the European Commission, the EU budget will not be adopted.

When the agreement is reached, the different programmes (eg the 7th Framework Programme on Research, the Health and Consumer Programme), must be revised to be in accordance with the EU budget.

Adoption of the InterInstitutional Agreement

On the 04 April 2006, the EU presidency (Austria), the European Parliament and the European Commission have finally reached an agreement after four difficult rounds of negotiations, adding 4 billion Euros to the budget agreed by the December Council. The EU is therefore to spend 864.4 billion Euros over 7 years. The new Inter-Institutional Agreement will enter into force on 1 January 2007, replacing the existing agreement dating from May 1999.

According to the European Commissioner for budget and financial perspectives, Dalia Grybauskaite, "this is the minimalist minimum to go ahead".

Main points of the agreement

 Level of spending

The EU budgetary framework will provide 864 billion Euros over 7 years. The Parliament has secured 2 extra billion Euros of ’fresh money’ while the 2 other billion Euros come from the emergency and administrative expenditure, outside the overall 2007-2013 budget - therefore adding 4 extra billion Euros to the deal reached in December.

Competitiveness and foreign affairs appear to be the main winners of the agreement. With regard to the Health perspective, it should be noted that the 7th Research Framework will receive 300 million Euros and the Health and Consumer Programme an extra 200.

 Details of the spending

 The qualitative structure of the IIA was negotiated:

 Four spending reserves were endorsed: a flexibility instrument, a solidarity fund (for rapid assistance in case of major disaster), a globalisation fund (to assist workers, victims of major structural changes due to world trade) and emergency aid reserve (response to the needs of third countries and humanitarian operations).

 The European Commission will undertake an assessment of the Financial Perspective (the Review Clause) and the IIA by 2008-2009 and will involve the European Parliament.

 The Member States agreed to take more responsibility to improve control mechanisms on EU money spent at national level. They will sign a declaration on the management of Community funds.