EU's Billions to Flow to Familiar Shores

Days before a crucial EU summit gets underway, there seems to be no solution in sight for a growing row over the 25-member bloc's long-term budget. With both net payers and recipient countries refusing to give ground on their long-held positions, the situation raises the prospect of real financial gridlock on top of the political crisis sparked by two 'No' votes to the EU constitution.

The budgetary problem involves wrangling over the smallest decimal point of percentage tables, rebates and net contributions to the EU coffers. The rumblings have eclipsed the fact that the debate on the EU budget was also meant to give the floundering bloc some political direction after the shock over the treaty rejection in France and the Netherlands.

Wrong direction

"We talk too much about the scope and quantity, too little about what the money is going to be spent on," said Friedrich Heinemann, expert on EU finances at the Center for European Economic Research (ZEW).

Heinemann added that whether the EU budget for 2007-2013 finally amounted to a trillion euros or 800 billion euros was indeed relevant, but what was central was "the false direction as far as focusing responsibilities was concerned."

After all, it's already clear that the main thrust of the EU's budgetary spending is going to remain unchanged. Agricultural subsidies that were agreed upon in 2002, will in the coming years take up more than 40 percent of the total EU budget. Taken together with spending for structural funds and aid for poorer regions, the EU's budgetary margin will be massively squeezed, leaving little room for any other project. Money for developing a new political focus or for more leeway for trade and diplomacy on the international stage will hardly be available.

Losing sight of the real goals

"Unfortunately too little money is spent on the actual European responsibilities, European foreign policy and also on research and development," lamented Heinemann.

Not much is expected to change until 2013 despite documents by the EU Commission filled with flowery ideas and recommendations. For instance, Brussels wants to promote research and technological development through the creation of "poles of excellence through transnational cooperation" and position the EU as a global partner.

But, the "KOM (2004) 487" document by the commission offers a more sobering view. From the 8.3 billion euros that are meant to flow into "foreign policy instruments" in 2007, more than one fifth of it alone is earmarked for "market oriented spending and direct payments for agriculture."

"Seems expensive … but it's appropriate," says a colorful information brochure given out by the Agriculture department of the EU.

Don't touch those farm subsidies

Determined savings in agricultural policy and a tough regulation of structural policies -- like Heinemann demands -- is out of question: The national interests of EU member states stand in the way.

"Instead of seeing that the unified political interests and focuses of the EU are implemented, they (the EU members states) seem to be more interested in what their own country can get from the EU," is how the independent Europe portal EurActiv.com sees it.

In the meantime, it remains uncertain whether EU leaders will be able to solve the budgetary tangle at the summit scheduled for June 16-17. "It would be a pity if it didn't come to that," said EU Foreign Commissioner Benita Ferrero-Waldner.

But, Heinemann knows the way the EU works. "Once the pressure of time becomes crucial enough, then they'll find a solution," he said. He added that the fact that agricultural policy would "come away unscathed is relatively annoying."