Reports

Shaping up the enlarged Union - The next financial perspective

17 February 2004


Michaele Schreyer, European Commissioner for the Budget, addressed an EPC Breakfast Policy Briefing on “Shaping up the enlarged Union – The next financial perspective.” The Commissioner discussed the recent Commission communication setting out its vision for the EU and its future budget plans for 2007-2013, explaining the Union’s goals and challenges in the years ahead, especially given the bloc’s imminent eastward enlargement. The event was chaired by EPC Chief Executive Hans Martens.  A question and answer session followed. This is not an official record of the proceedings, and specific remarks are not necessarily attributable.

For some people, the Commissioner said, the discussion over financial perspectives was more of a dividing issue than anything else. But the large attendance at  the briefing illustrated that it was also an issue that brought people together. A week ago, the Commission had not yet signed off on its communication. The Commissioner discussed the goals and challenges ahead, the instrument of the financial perspectives and the specifics of the new proposal.

Goals and Challenges

Lisbon targets

The main challenge for the coming years had been set by the Lisbon Agenda: to make the EU the world’s most competitive, knowledge-based economy by 2010. It was now the question whether the EU would make a renewed effort to reinvigorate the Agenda or admit the goal could not be achieved in its present form. This overall aim was bolstered by specific operational goals, such as increasing EU spending on research and development to 3% of GDP or improving Internet access throughout the Union. By 2013, the situation in the world economy would have changed radically and the EU had to face this challenge or risk losing its competitive position, she underlined.

Establishing an area of freedom, security and justice

The so-called third pillar policies were increasingly becoming part of Community policies. At the 1999 Tampere Council, EU heads of state and government had agreed a roadmap to establish an area of Freedom, Security and Justice in the Union. Specific initiatives in this area included the decision to create a European Police Academy, to establish an agency for border control (strengthening but not replacing national efforts) and migration policy.

Europe and the world

“Europe should play a stronger role in the world,” Ms. Schreyer said, adding that this was also one of the main ideas underpinning the draft Constitution. “The impact when we work together is much, much bigger than when Member States work alone,” she said.

Full integration of the new Member States

Turning to enlargement, she reminded the audience that the Union’s population was set to grow from 375 million to 450 million in only three months time. Enlargement from 25 to 27 Member States would add another 30 million people as of 2007, with the expected joining of Bulgaria and Romania. Widening the Union “means overcoming the division of the European continent,” the Commissioner said. In economic terms, Enlargement would lead to an increase in differences in the economic situation in the EU, as evidenced by the fact that gross national income in the EU will increase by only 6% once the 12 new Member States had joined. It was against this backdrop that the Commission had set out to establish new seven-year spending plan. “Enlargement is a very big challenge for the whole continent, but it is also a challenge for the European budget.”

Financial perspectives

The financial perspectives sought to set the framework for the annual budget and provide the means to implement EU policies. The Commission was convinced the financial perspective was a very good instrument which stands to be  transformed from “soft law” to an obligatory instrument if the draft constitution is adopted.

Categories of the financial framework 2007-2013 proposed by the Commission:

1. Sustainable growth: This category would have two subheadings:

(a) Competitiveness for growth and employment. The Commission’s plan called for a “very high increase” in this area: “Here the Community must do more to achieve the common goals of Lisbon,” the Commissioner said, arguing that the EU must realize the full potential of the opportunities posed by enlargement, which would make the Union the largest internal market in the world. More must be done for example to strengthen coordination of research activities to make the EU more competitive compared to the United States, Japan and China. This sub-category also includes education, training, improving student mobility, and Trans-European networks. It also contained a reserve to be used in connection with the broad economic policy guidelines. 

(b) Cohesion for growth and employment. The cohesion and structural funds were the EU’s instrument for solidarity and should be one of the main instruments to increase competitiveness of the regions. The Commission’s plan would give equal treatment to poor regions in rich old Member States or poor new Member States. It also contains  a new instrument replacing 'objective two' and an instrument for cross-border cooperation.

2. Preservation and management of national resources. This included agriculture, in the form of market-related expenditures and direct aid to farmers, based on a Council agreement of 2002. One question for the Council now was whether this should be changed or not. Rural development and the environment also fell under this category. Ms. Schreyer said the rationale behind this was that when policies were grouped in the same category they must compete for the financial means available.

3. Citizenship, freedom, security and justice. The creation of this new category evidenced how this policy area had risen up the political agenda. It includes migration policy and border control, which would become even more important with the EU’s eastward expansion. It also includes protection of health and of consumer interests – to mention only a few aspects where the European citizen expect the EU to provide "European public goods".

4. The EU as a global partner. This should include the European Development Fund, providing assistance to African, Caribbean and Pacific nations in the future, which is currently part of an extra budget, as well as pre-accession bids to countries such as Turkey. Putting the European Development Fund under the EU’s central budget would help overcome many of the bureaucratic hurdles currently faced by recipient countries. Spending in this area should be increased, especially given increasing expectations that EU should speak with a single voice in external affairs. “We take this very seriously,” Ms. Schreyer said. "Europe should take over more responsibility in the world".

Own resources ceiling

In its proposal, the European Commission was by no means suggesting an increase in the “own resources ceiling” . “There is no proposal from the Commission for amending the law to increase the ceiling on Council tables.” The overall ceiling as laid down in the law (and agreed by EU governments and heads of state in Berlin in 1999) is to hold the spending ceiling at 1.24% of gross national income from 2007-2013. Of this spending ceiling, the Commission proposes to use 1.14% on average over the period.

The philosophy behind the Agenda 2000 that the budget for the EU 15 Member States should decrease to shoulder the burden of enlargement continues to be  valid.

Financing

The Commissioner stressed that the EU executive was not seeking to change the structure of sources for financing with the beginning of the next financial perspective, though it would address this question in further detail in its Own Resources Report before summer 2004. The Commission, however, also planned to make legislative proposals to introduce a so-called generalised correction mechanism. Its overriding goal was to ensure that the difference between what Member States paid in and got out should not be unfairly high.

As the EU faced a number of difficult issues simultaneously, it was essential not to link the discussions on the draft EU Constitution with the financial perspectives, the Commissioner warned. As for the Commission’s timetable, it hoped to have a decision on the financial perspectives in the first semester of 2005. She also warned against letting the discussion on financial perspectives get bogged down by a discussion on numbers. Far more important was the discussion about building a common future in an enlarged EU.

Conclusion

The chairman, Hans Martens, warmly thanked the Commissioner for her clear presentation, highlighting the priorities of the EU budget for the future, and for her openness in participating in the question and answer session. He also added that EPC would be following the further developments in the financial perspectives over the next couple of years in its new Integrated Work Programme on ‘Economic Governance,’ which he urged EPC members to join.