EU Summit: Step One To Spending €1-trillion …

• November 24th, 2012
• Posted by 7thmin

Heads of government debating the EU’s next seven-year budget have ended their summit in Brussels talking about a “first-step” on agreement –  the process now extended into the New Year.

COUNTING IN BILLIONS

At issue during the two-day gathering, 22-23.11.12, is a proposed rise, initially in the order of 5.5%, meaning tens-of-billions of Euros.

The plan started with proposed spending of €1.091-trillion (A$1.35321-trillion ; xe.com, 24.11.12) for 2014-20, up from the current €1.034-trillion (A$1.2851-trillion) for 2007-13; under pressure it has been scaled down to €1.010 (A$1.24034-trillion), but in turn, there’s now counter-pressure to push that back up.

TWO SIDES

The talks separated more prosperous Northern members of the European Union, like Britain, Germany, the Netherlands and Sweden (wanting a static or reduced budget), and others including Italy in the South, or Poland in the East, (supporting expansion).

The “reduction” argument has a good dash of right-of-centre political sentiment in it. The likes of Prime Minister David Cameron and Chancellor Angela Merkel have been cutting spending at home and argue that the same should happen for the EU as a whole. As well, the “conservative” interests in this argument are pointing out that the last budget was formulated before the Global Financial crisis, when credit conditions were much easier than today.

They are also net contributors to the EU, putting in more than they take out — they “pay the bills”. It’s an aspect of the investment-orientated strategy of EU spending. Under this strategy, smaller and weaker economies benefit from getting infrastructure and development money, to modernise their roads, telecommunications, law enforcement or management systems. In return, all member countries get the benefit of having more productive partners and more customers in the EU single market, who can afford to spend more.

The logic of the “Anglo-German” argument, that domestic austerity should be followed by EU austerity,  holds up if those spending cuts have been applied across the board, i.e. to every item of expenditure, and if tasks and priorities of government at the national and EU levels are seen as the same thing.

COMMON AGRICULTURAL POLICY – AGAIN

It’s a point that was debated by the French President, Francois Hollande. He got support from Eastern Europe, and succeeded with his demand for a let-up on reducing the enormous commitment to agriculture and support for regions. The “net contributor” group may yet get agriculture reduced in this budget, but not by as much as they wanted.

Europe’s Common Agricultural Policy, once notorious for huge output-based farm subsidies, has gone over to heavy backing for research, agricultural extension and development spending, with actual amounts of money kept much the same. (See EUAustralia Online: “EU’s new phase in slow retreat from deluxe farm subsidies”, 2.11.10; “Be partners and cut farm protection, says Rudd, 3.4.08; “Agriculture: Europe’s spending claw-back …”, 28.12.07).

SUMMARY OF ARGUMENTS

Situation summary, as the government leaders and officials return to their home bases:

The argument is another re-phrasing of the current policy options of governments, still battling to get their economies out of a recessionary trough: whether to get rid of the burden of debt by squeezing outlays, but risk causing a depression; whether to help recovery and growth by spending, but risk dragging it back, because of unsustainable debt; or whether to try a middle way, austere budgets with targeted stimulus programs — if such can actually be done.

They should be going home with heavy headaches.

The EU has seven-year budgets because of the giant size of the operation and the great complexity of getting agreement on it. It has to start with the European Commission, go through the national governments, be approved by the European Parliament, and then be agreed to by the European Council – the heads of government together.

Picture: budget architects, Jose Manuel Barroso, President of the European Commission; Herman Van Rompuy, President of the European Council – waiting on an outcome with keen interest.

Several thousand people will have an involvement in framing it, not counting the many lobbyists, and foreign and EU interest groups that seek to have an influence on it – which must bring the number to several million souls.

As one Australian diplomat observed, the slow pace of co-decision making and exhaustive consultation does produce benefits in the end. Things have been worked out so thoroughly, and the parties have invested so much in the final decision, they then stick to it. Deals with and within the EU, once made, can be expected to hold.

Differential levels of wealth and economic sophistication in Europe, and therefore different policy lines on managing the joint economic affairs of EU countries, have been accounted for in many ways.

BLUE BANANA ECONOMICS

Among the most influential, the “blue banana” * zone proposed by the French geographer Roger Brunet and associates identifies the economic core as a set of highly-developed regions with large industrial cities.

It begins at Milan, takes in heavily industrialised zones in Germany and France, and North-western England, butting onto London in  the country’s prosperous South-east.

Reference

Charlie Dunmore and Luke Baker, “EU budget summit ends without deal, retry in 2013”, Reuters, London, 23.11.12. http://www.reuters.com/article/2012/11/23/us-eu-budget-idUSBRE8AM0KL20121123, (24.11.12).

Graeme Wearden, “David Cameron blasts EU as budget summit ends without a deal”, The Guardian, Manchester, 23.11.12. http://www.guardian.co.uk/business/2012/nov/23/eurozone-crisis-eu-budget-summit-cameron, (24.11.12).

* Blue Banana

Lee Duffield, Graffiti on the Wall …, 2002; see “blue banana” in Economic Reconstruction …, p152.  http://eprints.qut.edu.au/view/person/Duffield,_Lee.html, (24.11.12).

Wikipedia, SF, “Blue Banana”. http://en.wikipedia.org/wiki/Blue_Banana, (24.11.12).

Pictures   eu, wikipedia

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