Parliament cuts own spending to facilitate agreement on EU budget

European Parliament. Committee on Budgets BUDG, in session. (European Parliament Audiovisual Services).

European Parliament. Committee on Budgets, BUDG, in session. (European Parliament Audiovisual Services).

The Budgets Committee of the European Parliament made yesterday a new proposal on the 2014 EU Budget, that the European Council cannot deny. Law makers cut down the legislative’s own expenses, but reversed the Council’s proposed cuts in investments to stimulate growth and jobs. In detail Budgets Committee MEPs voted yesterday in favour of cutting the Parliament’s administrative budget for 2014 by almost €10 million compared to the Commission‘s June draft budget proposal. The outcome is a real-term reduction in Parliament’s own budget, despite the extra costs related to 2014 elections and the increased spending for Croatia’s accession.

According to a Press release issued by the Parliament, “The MEP responsible for administrative budgets, Ms Monika Hohlmeier (EPP, DE), welcomed the outcome of the vote: “We have achieved a real-term cut in Parliament’s budget. This is a remarkable outcome, given that the extra costs due to the departure of MEPs is already estimated at 2.1% and the additional costs of Croatia’s accession amount to +0.17%”, she said.

Core growth spending

As far as EU’s overall Budget is concerned, a Parliament Press release issued yesterday stresses “In areas that MEPs believe are vital to boost the economy, such as research, entrepreneurship and (youth) employment measures, the committee recommended reversing the budget cuts proposed by the Council in July”. MEP Anne Jensen (ALDE, DK), who is steering the largest part of the proposal through Parliament said, “We agreed to a €360 million frontloading in investments, research, education and innovation, an effort that is sorely needed. It is strange to see that the Council has cut the budget in precisely these areas”.

The Parliament will finalise its proposals with a vote at the 23 October plenary of the House. After the vote, there will be 21 days of conciliation talks with the Council. If conciliation produces an agreement, it will be put to a final plenary vote at the November session. As a matter of fact the time schedule for final approval of the overall EU 2014 Budget becomes very tight. However it’s not only the 2014 Budget that the troubles the Parliament.

EU debts to citizens

There are unpaid bills of €3.9 billion, pending even from the 2012 exercise. This is money owed to member states, local authorities and other entities for having completed projects co-financed by the EU. The Council has not yet agreed to cover those liabilities with an extra 2013 budget addendum, as the Parliament has demanded. Legislators fear that member states (the Council) aim at paying those bills with 2014 money, reducing further in this way the availability of credits for next year. The three major parties of the Parliament EPP, S&D and ALDE have made clear that there won’t be any approvals for the 2014 budget or the 2014-2020 EU spending ceiling (Multiannual Financial Framework), if the Council doesn’t cover the €3.9bn in overdue obligations.

Parliament Budget Committee chair, Alain Lamassoure (EPP, FR), has warned that the lack of payments – a result of too low budgeting over the last three years – makes the 2014 budget exercise extremely difficult: “The situation is alarming. In the best case scenario, we arrive at a budget in 2014 that is 6% lower than in 2013. But 90% of the available money for next year will be used for finalising old programmes. This means that at a time when the EU is in dire need of investment, we are scarcely able to invest in anything new.”

Undoubtedly the EU’s future budgets constitute a difficult friction point not only between the Parliament and the Council, but also among member states. Countries with net contribution to EU’s budgets, like Germany, Holland, Austria, Finland and the UK are increasingly reluctant to finance the Union’s expenses, at a time when they cut down their own home budgets. Most likely the confrontation over EU budgets will reach the end year summit of the 28 EU leaders, where a far-reaching ‘horse trade’ will take place, before the ‘donors’ agree to go on financing the Union’s spending.

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