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Budget hawks circling EU development aid

07-11-2012

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This article was written by Laura Mayer. Florian Kratke co-authored this article.

European Heads of State will be taking more than one shirt to the 22-23 November budget summit, anticipating lengthy negotiations for reaching the political agreement on future EU funding needed by the end of the year.  EU insiders are expecting a deal to include cuts of up to €200 billion. A key question is how much development cooperation expenditure will be lost in the process.

The revised “negotiation box” for the EU’s 2014-2020 Multi-Annual Financial Framework (MFF), presented by the Cyprus EU Presidency at the end of October, will serve as the basis for the European Council’s discussions. It includes, for the first time, concrete numbers for each of the main budget headings. Overall, the Presidency proposes a €50 billion cut to the European Commission’s €1 trillion proposal, i.e. a 5% decrease. Cuts have been proposed for every budget heading (see Figure 1) except “Heading V” (the EU Institutions’ administrative expenses) hinting as to where there might be room for further cuts. “Heading IV” for “Global Europe”, which includes development funding, faces proportionally the biggest cut of all headings – a 7.3% reduction, from €70 billion to €65 billion (Figure 1) compared to the EC’s proposal.

The Presidency’s proposals have forced EU Member States to finally communicate their national interestsA European diplomat quoted by EU Observer said“In a way, the talks have been going on for over a year. But these were not real negotiations – it was just countries setting out shopping lists of demands […]”. While Germany and France judged the Presidency’s proposal a step in the right direction, several other EU Member States argued that the proposed cuts don’t go far enough. The most vocal member of this group last week was Sweden, traditionally a “development champion”. EU Affairs Minister, Birgitta Ohlsson called the Cypriot plan “a budget for the 1950s“, given proposed cuts to research and cross-border infrastructure spending instead of decreasing funding for the EU Common Agricultural Policy. David Cameron currently stated, “I’ll be arguing for a very tough outcome. I never had very high hopes for a November agreement because you have got 27 different people round the table with 27 different opinions.”

The European Commission, and supporters of its original proposal, including the European Parliament and the ‘Friends of Cohesion’ group, rejected the Presidency’s proposed cuts, in particular those to the EU’s cohesion policy. They argued the proposal sends a negative signal by calling for cuts to policy areas promoting European competitiveness, growth and employment.

Implications for developing countries

Heading IV has not been the focus of the negotiations so far, as no outspoken supporters for foreign affairs and development funding have emerged amongst the Member States.

The exact cuts to specific EU development programmes remain to be negotiated.  This will have implications for the Commission and European External Action Service who are currently in the process of programming EU development instruments and attempting to differentiate levels and types of aid to partner countries.

The Presidency’s negotiating box confirms that the European Development Fund (EDF), the EU’s main aid instrument for the African, Caribbean and Pacific (ACP) countries, will remain outside the EU budget, but ominously adds that the “EDF, like all the other Headings of the MFF and instruments outside MFF, will also need to be subject to reduction efforts”. If the 7.3% reduction to Heading IV is applied to the EDF, a “zero growth scenario” for the fund will be avoided since the 11th EDF would be roughly €31.5 billion down from €34 billion – still higher than the €23 billion for the 10th EDF, but which relates to a shorter EU budget cycle.

The new options for the EU Member States’ EDF contribution keys, which correspond to voting rights on the EDF Committee, have also been proposed. Interpreting these keys suggests that France could reduce its contribution to the EDF by as much as €570 million. The largest contributors (France, Germany, the UK, Spain and Italy) could reduce their combined contribution from 76% to 71% – as expected. Countries such as Poland, Romania and Czech Republic would largely pick up the tab in this scenario. Despite advocating the largest cuts, Sweden would increase their contribution by €70 million, whereas the UK would lower it by ‘merely’ €27 million.

What next?

The EU Council President, Herman van Rompuy, and the Cyprus EU Presidency are now having bilateral talks with Member States on the EU budget in the run up to the November summit.  Ministers for European Affairs will discuss the negotiating box in the General Affairs Council of 20 November, which will feed into the 22-23 November Summit.

Laura Mayer is Research Assistant at ECDPM’s EU External Action Programme. Florian Krätke, who co-athored this article, is Research Assistant at ECDPM’s EU External Action Programme.

This blog post features the authors’ personal views and does not represent the view of ECDPM.

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European external affairsExternal Action in Global RegionsEuropean Development Fund (EDF)Europe

External authors

Laura Mayer