The Commission offers exit from the EU budget stalemate

Discussion between José Manuel Barroso, President of the European Commission on the right, and Janusz Lewandowski, member of the EC in charge of Financial Programming and Budget, on the left, in the presence of Catherine Day, Secretary General of the EC. (EC Audiovisual Services)

The European Commission took action yesterday to unlock the double stalemate over the approval of both, the 2014 EU budget and the Multiannual Financial Framework 2014-2020. The MFF sets the spending ceiling of all EU bodies at €960 billion for the next seven years. To overcome the dead-end Commissioner Janusz Lewandowski responsible for budgets, proposed yesterday a second addendum to the 2013 EU budget of €3.9bn, to cover the unpaid bills of the Union for 2012-2013, totalling at €11.2bn and relating to completed EU co-financed projects in member states. These additional funding needs have created frictions between the European Parliament and the Commission on the one side and the Council (member states) on the other.

The Commission, the Council and the European Parliament have already adopted a first instalment of €7.3bn, to pay for the Union’s commitments to beneficiaries of EU funds. These are mainly national, regional and local authorities, waiting for EU reimbursements for EU funded projects they have completed. The Council, that is the member states, have obstinately rejecting to approve the additional €3.9bn needed to cover the entire package of €11.2 bn in overdue liabilities. The untold aim of the Council was to pay the extra €3.9bn with money deducted from the 2014 EU budget, in this way further reducing the EU spending ceiling for next year.

The Parliament is not backing off

In view of that the European Parliament withheld its approval on both the 2014 EU budget and the MFF 2014-2020 demanding that the additional €3.9bn is released. The European Sting has been following closely this issue. Sting writer Maria Milouv noted on 20 September, “The Parliamentarians fear that the Council aims at financing the coverage of a good part of the Union’s 2012 and 2013 unpaid bills with 2014 funds and not by an independent addendum to the 2013 budget, as they wished and it was agreed in July. Those bills amount to €11.2 billion. Member states’ economy and finance ministers (ECOFIN) took a formal decision to cover only €7.3 billion of the above amount and said they will decide in autumn on a second tranche of €3.9bn to cover the rest. This last ECOFIN decision is still pending”.

Now the Commission takes the lead and proposes this second addendum in the EU 2013 budget, amounting exactly at €3.9bn. According to Lewandowski these funds do not constitute additional financial commitments, but come after a reallocation of available resources within the 2013 spending ceiling. Despite that the draft amending budget has to be approved by the budgetary authority of the Council (EU Member States) and the European Parliament. Given that the approval of the Parliament must be considered as given, the onus is on the Council to honour the agreement it concluded with the legislators and the Commission in July.

In the Press release issued yesterday by the Commission, the EU’s executive states openly that this proposal is linked to the adoption of the MFF, “as the European Parliament has stated that having an absolute guarantee that the outstanding payment claims for 2013 will be covered in full is one of the conditions to give its consent to the MFF regulation covering the next period (2014-2020)”.

Cohesion in words

It is obvious that the money will go directly to member states. Despite that the Council made up also by the member states refuses to approve it. According to the Commission the bulk of the €3.9bn will be spent “to pay bills sent in by Member States in the cohesion policy area (i.e. €3.1bn). Some EUR 344 million will be used to reinforce instruments stimulating growth and jobs in particular research, SME financing and student mobility”.

Now it remains to be seen what will be the reaction of the Council. It is pretty clear that the Parliament and the Commission go together in this. It is also obvious however that the Council is split over this additional 2013 funding. The reason is that the €3.1bn out of the €3.9bn is cohesion funds and will go to the poorer EU countries. That’s why the wealthy ones are dragging their feet.

.