18/10/2011 October 2011 – Will the Council and the European Parliament come to an agreement on the EU’s 2012 budget ?

The 2012 budget will be central to the European Parliament’s next plenary session with a debate planned for October 26th in Strasbourg. While the Council of Ministers has stated that it is not in favour of the European Commission’s budgetary proposals, MEPs from the Budgets Committee voted for a rebalancing of the budget more or less in line with the Commission’s proposal. Given this clash that has once again pitted MEPs and Member State representatives against each other, adoption of this budget looks likely to become the subject of heated debate as occurred last year.

The European Commission’s proposal for the 2012 budget was adopted on April 20th. Faced with the current crisis, the Commission then chose to increase the EU’s budget. The Commissioner responsible for the budget and the financial programme, Mr. Janusz Lewandowski, stressed the need to make European growth more dynamic for the benefit of European citizens.  The Commission proposal takes the climate of austerity fully into account, integrating it into the budget. For example, it examines EU action giving greater attention to those “that bring genuine benefit to the whole of Europe” and less to others. The Commission thus called for a hike of 4.9% in payments (i.e. €132.7 billion more) and an increase of 3.7% in commitments (i.e. €147.4 billion more).

The European Union’s budgetary planning includes both commitments (legal commitments to provide the budgetary funds so that certain conditions can be fulfilled) and payments (providing funds to beneficiaries). 

This ambitious proposal from the European Commission led six Member States (United Kingdom, Netherlands, Denmark, Finland, Austria and Sweden) to express their disapproval of the plans last July. They do not feel it is appropriate to increase the budget when some Member States are going through a period of significant belt tightening. The Council then agreed to an increase of about 2% for the budget which corresponds to the 2% inflation calculated by the Commission. As such, Council was calling for a budget freeze.

The European Commissioner was highly critical of the Council of Ministers’ decision. He does not accept that this position “is the right one to balance intelligent investment and voluntary restraint especially with regard to competitiveness”, he stated during the European Parliament plenary session on September 14th last.

The EP decision on the budget is thus hotly anticipated. If it is not in line with the Council’s position, a conciliation procedure will start in November for three weeks. It is already fully expected that this process will be initiated. The European Parliament’s Budget Committee met on October 5th and voted on a budget that is close to the Commission’s – and therefore runs counter to the Council’s position.

Presentation of the European Parliament’s position

Several Council amendments are queried in the European Parliament’s report on the proposed budget. Here are the main points.

The Europe 2020 Strategy was adopted by the European Commission in March 2010. This strategy aims to bring the EU out of the crisis and to prepare economically for the decade ahead. 

Three major forces for growth were initiated to be implemented at European and national level:

·         - Intelligent growth : promote knowledge, innovation, education and the digital society ;

·         - Sustainable growth : make production more resource efficient and at the same time boost our competitiveness ;

·         - Inclusive growth : foster participation in the labour market and the acquisition of new skills and continue the fight against poverty.

The first heading of the budget, "Sustainable Growth", is divided into two sections. Within the section entitled “Competitiveness for growth and employment” (1a.), the European Parliament first reminds us of the importance of achieving the aims of the Europe 2020 Strategy. The report highlights the lack of increase planned for investments that are necessary to implement the seven initiatives of the Strategy. MEPs are convinced that “this move will be prejudicial to the achievement of the Strategy’s general objectives by 2020”. Francesca Balzani (S&D), general rapporteur for the 2012 budget highlighted repeatedly that the growth strategy should not fall victim to the current crisis as the investments are necessary to help the Union exit the crisis. In contradiction with the Council’s position, the EP therefore added funds to this section of about €30 million. 

Regarding "Cohesion for growth and employment" (heading 1b.), while the Council wants to reduce the amount of credit for the European Regional Development Fund, the European Social Fund and the Cohesion Fund, the EP decided to go along with the funding proposed by the Commission in its budget plan. The EP lambasted the restrictive approach adopted by Council. 

Within the second heading of the budget, "Conservation and management of natural resources", the EP once again considered the Commission’s position "more realistic" than those of Council "particularly given the current climate of economic uncertainty and instability in the market and in the income of farmers". At the request of the Agriculture Committee, the EP adopted a prudent position taking into account potential future crises like, for example, an e.coli outbreak. It therefore added €250 million to the fund for fruit and vegetable producers. 

Much debated was the future of the EU food aid programme for the poorest people and this is dealt with in the parliamentary report. The EP has maintained the budget for this programme and made a strong appeal for “a legal solution to be created immediately to avoid dramatic reductions in the different programmes given the difficult social situation that several Member States are experiencing as a result of the economic and financial crisis”. The Parliament was indirectly criticising the negative attitude of some Member States, which prevents solutions from being found on this dossier.

Under the third heading in the budget, "Citizenship, freedom, security and justice", the EP once again finds itself in disagreement with the position of Member States. In the "Liberty, security, justice" section (3a.), MEPs were particularly critical of the reductions that the Council wants in the European Refugee Fund. Furthermore, due to the recent strengthening in the powers of FRONTEX (the EU’s border agency), the EP thinks it necessary to increase its budget by €25 million. This budgetary increase will enable the maritime borders in the Mediterranean to be monitored and will mean increased surveillance of the Greek-Turkish border. 

Voting on the budget in the European Union follows a procedure as designated in article 314 of the Treaty on the Functioning of the European Union. At the end of this procedure, the two budgetary authorities – the Council and the European Parliament – must reach an agreement.

Within the second section of this heading, "Citizenship", MEPs feel that the reduction in spending on citizenship that the Council is calling for is inappropriate. 

The fourth heading of the budget is about the EU as a global player and is turning out to be the area in which divergences between the Council and the Parliament are the least pronounced. The two institutions are in agreement on the subject of increasing by €400 million the commitment aiming to finance supplementary measures in the region covered by the EU’s Neighbourhood Policy. The EP stated on this matter that "this is in line with its commitment to a clear and coherent response to recent political developments in the southern Mediterranean region".

The EP has also approved a €100 million increase in aid to Palestine and stressed that this increase is "vital to ensure the safety and survival of refugees and to support efforts to create a viable Palestinian State". Furthermore, Parliament expressed a wish to develop “a clear strategy for Palestine that creates a link between the financial aid granted by the European Union and a greater role for the EU in the peace process that is ongoing between the two sides in the conflict”.

Other increases were also approved : €27 million for the Development Cooperation Instrument for Asia and South America; €3 million for the Turkish-Cypriot community. To compensate, there would be a reduction in spending on the EU’s police mission to Afghanistan.

Finally, the fifth heading, "Administration", is about the budget of different institutions. The European Parliament is especially outraged by the approach adopted by Council. It “rejects the Council’s general position on spending” in this area that amounts to a reduction of €74 million. The EP believes that “such a restrictive approach while allowing for short-term savings in the Union’s budget and Member States’ budgets, can only compromise implementation of the Union’s policies and programmes”. The Council’s position in this area is in line with the aim to control administrative spending in the EU’s institutions and this is “in accordance with the approach being followed by Member States for their own public services”.

With regard to the Commission’s budget, the EP is very critical of the Council’s position and wants to know how “the Council is in a position to evaluate the probable effect on the Commission’s services in a more precise manner than the Commission itself”. Furthermore the EP praised the considerable effort undertaken by the Commission to freeze its administrative spending.

Nonetheless as a result of these observations, each institution has worked to reduce its own budget. As such, the Council has reduced its administrative spending by 5.45%. The European Parliament has reviewed its budget estimations downwards from the 2.3% increase proposed in April to an increase of 1.9% on administrative spending.

The European Parliament will debate these amendments during the plenary session on October 26th.


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