New round of bargaining for the 2014 EU budget late in autumn

Martin Schulz, President of the European Parliament (on the right) and Alain Lamassoure , chairman of the budget committee of the legislative visited the Commission to negotiate with the Presidency the MFF 2014-2020 that is the next seven budgets of the European Union. (EC Audiovisual Services 27/06/2013).

The Council of the European Union and more precisely the Permanent Representatives Committee, echoing directly the dictums of the 28 EU governments – without having consulted with the European Parliament – reached between them an agreement on the 2014 European Union budget. Needless to say that the resources the Council offers to the Union for next year will be substantially less than in 2013. The Permanent Representatives Committee is composed by the ambassadors of the 28 EU member states. Its role is to prepare decisions of the Council.

This is the first annual budget for the period of the new multiannual financial framework (MFF) 2014-2020 on which a political agreement was reached by the Council and the European Parliament at the end of June. Of course this agreement between the European Parliament, the Council and the Commission does not cover any particular budget of the next seven years and the prior concession and the positive vote of the European Parliament is needed for every one of them.

Much less

In detail compared to the 2013 budget the resources committed for the entire EU for next year are reduced by €9.33 billion or 6.15%. Payments are supposed to be increased by €1.79bn or 1.35%. Compared to the amounts proposed by the Commission, the Council’s position provides for a reduction by €240.68 million in commitments and €1.06bn in payments. At this point it must be noted that the crucial quantity in any EU budget is commitments, because payments are usually deferred to when the needed cash is available. In contrast commitments bind the EU but are usually paid with a delay.

Only the widely advertised by the 28 EU leaders ‘Youth Employment Initiative’ is exempted from reductions in the 2014 EU budget. Yet even in this spending line the Permanent Representatives Committee notes that this exemption will be realised “on the basis of past and current budget implementation and realistic absorption capacities”. In plain English this means that reductions may be realised even in this chapter, if during the implementation of this year’s or past budgets there was a difficulty in absorbing the relevant amounts. Difficulties in absorptions of EU money in various programmes are always present due to national and Brussels bureaucracy. This may be used as a pretext to cut down even the money set aside to fight youth unemployment.

Now what?

The next step is that this Permanent Representatives agreement has to be formally adopted by the Ecofin council which comprises the 28 EU ministers of Finance. Once this stage completed, the Council Presidency will be mandated to start negotiations with the Parliament. In the current six month period the Council Presidency is held by Lithuania.

It usually happens that the political weight of the country holding the Presidency plays a crucial role while negotiating with the Parliament. It was characteristic that the Irish Presidency during the first half of the year had erroneously advertised a final agreement with the Parliament over the new multiannual financial framework (MFF) 2014-2020 of a total value of €960bn. In the last minute it turned out that the Parliament had not agreed and the Irish Presidency had not understood that.

It took the weight of Manuel Barroso, the President of the Commission to fix this. He called a last-minute meeting and the Parliament agreed only after having secured three concessions; a sizeable increase in real budget spending, a full flexibility between budget lines and a zero base review in 2016 for the remaining budgets. As for the Irish Presidency the Prime Minister and the Minister of Foreign Affairs of the country had to fly to Brussels in the middle of the night in order to participate in that early morning meeting with Barroso and the President of the European Parliament Martin Schulz.

Now the present Council Presidency held by Lithuania will have to negotiate again with the European Parliament. The EU legislative is expected to adopt its amendments on the Council’s position in the week starting on 21 October. If the Council’s and the Parliament’s positions diverge, a three-week conciliation period will start on 24 October and end on 13 November included.

With such a tight time schedule the Parliament would have an advantage vis-à-vis the Presidency during their negotiations. Traditionally the Presidency is being pressed by the Council to conclude a timely agreement with the Parliament. It remains to be seen what the Parliament’s negotiators will be able to squeeze out of the Lithuanians.