Barroso's Budget Could Create Rift with Berlin

On the eve of the first meeting of the incoming European Commission, the body's designated president said in a series of broad interviews that he will follow the policies of predecessor Romano Prodi, including plans to increase the EU budget. His political course could throw him into a conflict path with Germany.

In interviews with leading European newspapers on Thursday, former Portuguese Prime Minister Jose Barroso said: "My starting off point will be the proposal that the Prodi commission made."

In February, the commission suggested increasing the EU's budget during the period between 2007 to 2013 from the current level of around €100 billion annually to €143.1 billion ($177 billion). The increase could represent an EU fee increase for Germany in the double-digit billions, and Berlin, as well as the other five so-called net payers of the EU have categorically refused the proposal. Net payers in the EU, like Germany and the Netherlands, pay more into Brussels than they get back.

In the lead-up to the meeting, Germany's EU commissioner, Günter Verheugen (photo), said on Friday that he believed Brussels and Berlin would ultimately reach a compromise over the budget. "The commission has produced its proposal for the upcoming budget, which forsees a considerable increase," he said. But, he added, the Council of Ministers is already negotiating what the exact figure will be and that there will "certainly be a compromise."

Bringing the East up to standard

In his interviews, Barroso said the additional spending was needed following the EU's May expansion, which brought 10 new, mostly former Eastern Bloc countries, into the fold. "We're making a big mistake if we see money that is given to the new member states as lost," Barroso said, according to the Financial Times Deutschland newspaper. Barroso also pointed to the stated EU goal of raising living standards in the new member states as justification for a budget increase. "Europe cannot have ambitious policies with insufficient money," he said, adding that politicians in the EU member states must explain to their constituents that everyone will profit from the increased budget spending.

In Germany, some fear Barroso could be on a conflict course with Berlin that will present myriad conflicts of policy interest. Just last week, after Barroso introduced the members and unveiled the competencies of his new Commission, which takes office November 1, Chancellor Gerhard Schröder said he felt their would be fewer conflicts with the body, which is the EU's executive.

Fuel for deficit disputes?

But Barroso's strong comments on the budget coupled with a coming battle over the reform of the Stability and Growth Pact that regulates the euro, Europe's common currency, show that in reality, there could be rough waters ahead. Germany and France, along with other EU countries that have had trouble balancing their budgets lately have pleaded for a looser interpretation of the pact's rules, which prohibit yearly budget deficits from exceeding 3 percent of a country's gross domestic product.

The new commission president said he is also dedicated to promoting the EU's plan to become the most competitive economic zone in the world by 2010. However, he said the deadline may have to get pushed back a bit. "I think we should do as much as possible to come near that goal. It was a very ambitious goal and many consider it too ambitious," he said. The EU member states committed themselves to the goal, cemented in the so-called Lisbon Agenda, at an EU summit four years ago. Now, Barroso says he wants to make it a central issue of his presidency.

Though Barroso said there was "greater awareness of competitive problems than there was (in the past)," he said he would still ask member states whether they want to postpone the target date.

"The goal of becoming the most competitive economy in the world is one we can achieve and we should not feel discouraged," he said.