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VOL. 36 | NO. 46 | Friday, November 16, 2012

WHY IT MATTERS: The EU budget debate

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BRUSSELS (AP) — The Issue: Europe's leaders will gather in Brussels on Thursday to decide on how much the European Union, the political and economic partnership between 27 of the region's countries, will spend in the next seven years.

Compared to the size of the governments of its member states, the EU is very small. Yet it wields broad power, and that's why this week's fight over its spending is important.

The current budget proposal from the European Union's executive arm, the Commission, calls for a €1.03 trillion ($1.31 trillion) spending ceiling for 2014-2020. This will mean each member of the EU contributing the equivalent of about 1 percent of its annual gross domestic product to the budget. Some of the money is then invested across Europe on various projects designed to bolster the region's economy: On subsidies for essential industries such as agriculture or fishing or on other joint projects such as border control and diplomacy. About 80 percent of the budget is redistributed back to the member states for spending, with the rest going to the Commission.

All 27 countries have to agree on the spending limit before the budget is approved.


Where The Leaders Stand:

The amount of money given to the EU is the subject of fierce debate in several member countries. At these talks, national interests will be paramount — voters back home will judge how well their politicians fought for their interests.

On one side of the argument are the region's poorer countries such as Portugal and Poland. These governments are relying on a larger EU budget to get them back on track for economic growth and are worried that any cut would hit programs and funding they are counting on.

On the other side are the countries who argue that the EU shouldn't expect any more money while governments across the region are drastically cutting their budgets to control their debts. The U.K., for example, has a long-held hostility to the European project and is demanding a real-term freeze in spending — threatening to veto the budget until it gets its way.

Thursday's meeting is expected to run into Saturday — with any agreement a very remote possibility. The talks are almost certain to drag on into next year.


Why It Matters:

At 1 percent of a member country's GDP, this week's debate is relatively small potatoes — the EU's budget for 2012, for example, is less than one-sixth that of the U.K.'s. Yet, the EU plays a crucial role in the lives of every European. Here are some of the areas in which it has made a difference:

Economic Development:

The EU says it has funded hundreds of thousands of infrastructure and capital projects over the years, from the installation of a broadband network designed to transform the economy of the north of the UK to upgrading parts of the road network on the islands of Malta and Gozo.

Competition and Trade:

When Europeans log onto their Windows-driven computers for the first time and see a screen giving them a choice of browsers, it's because the EU stopped Microsoft from foisting its Internet Explorer browser on users. The EU could also stop budget airline Ryanair from taking over rival Aer Lingus if it decides the lack of competition in Ireland's airline market might harm consumers. And when companies in the same business sector have skewed the market by artificially setting high prices, the EU has imposed fines running into the hundreds of millions of euros.


EU officials pay close attention to the state of democracy in member countries - and threaten to cut off vital aid if they think people's basic rights are threatened. For example, over the past year the EU has been concerned that Hungary, which joined in 2004, was slipping toward authoritarianism as press freedom and judicial independence came under strict controls. The EU launched legal action against Hungary, threatened to withhold development money, and summoned Prime Minister Viktor Orban to Brussels to discuss the error of his ways. The same holds true for EU candidate countries: They need to adhere to democratic principles if they want to join the club.

War and Peace:

The EU's original purpose — to make another European war unthinkable by increasing economic ties between countries — remains valid today. Europe-watchers worry that, if the EU broke up, rising nationalism could provoke new conflict. Impossible? Look at the collapse of the former Yugoslavia in the 1990s — more than 100,000 people died. Today both Serbia and its former province, Kosovo — whose independence Serbia does not recognize — want to join the EU. The EU has told them that if they are to sign up, they need to normalize relations with each other. Last month, the prime ministers of Serbia and Kosovo started face-to-face talks for the first time. The talks were held in Brussels — under the guidance of the EU.


The EU sees itself as an enforcer of values within its borders. It is illegal anywhere in the EU to discriminate on the basis of religion, disability, age or sexual orientation, and countries wanting to join must also enact anti-discrimination laws — which, for some would-be members, is quite a leap.

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