Budget battle

When the European Commission (EC) recently proposed to increase the European Union (EU) budget by almost 7 percent, you could practically hear the coffee cups falling out of politicians' hands in Berlin, London and The Hague. The criticism soon poured in, with decision makers wondering how the EC intended to increase the Brussels budget and enforce tough austerity measures at the same time. However, EC budget commissioner Janusz Lewandowski was undeterred.

"Our budget is a modest one," he said. "It is neither the cause nor solution to member states' debt and deficit problems."

Lewandowski cited two reasons for the proposed budget increase. For one, 2013 marks the end of a multi-year financing period for the EU, and payment will be due for many long-term projects. The EC budget commissioner also said member states previously trimmed the EU budget too much, and now have to make up. Last year, the EC wanted a five percent budget increase, but member states only gave two percent.

'A billion euros more'

The biggest payers, such as Germany, the UK and the Netherlands, are not just focused on the coming year's EU budget. They also want to trim the 2014-2020 budget. Last summer, the EC requested about 1 trillion euros ($1.32 trillion) to cover the six-year period. Werner Hoyer, Germany's minister of state at the time, declined immediately.

He said if EU member states had to make painful cuts in their national budgets, the EC should eliminate at least 100 billion euros from its own budget.

Nevertheless, compared to individual national budgets, the EC budget is small. Germany's annual budget alone is about three times as big as the entire EU budget. EU Parliament President Martin Schulz said it's just the EU budget's large proportions that bring it so much attention. He added Germany would only end up saving itself 1 billion euros per year if Hoyer's suggestion went through.

"Don't think a billion euros more for [German Finance Minister] Wolfgang Schäuble will solve his problems!" Schulz said.

Investments help all

Meanwhile, Lewandowski said many countries - especially in eastern Europe - desperately need EU funds.

"40 percent of total public investments in new member states are co-financed by Brussels," the EC budget commissioner said. "It's 25 percent in Portugal, and Greece nearly looks the same."

The EC believes the projects - which are often large in scale - help everyone. They benefit weak countries by boosting growth and employment, and help rich countries since contracts often head their way. Barroso thinks well-targeted investments can help build a pan-European network, and that Germany and other countries' contributions to the EU budget is money well spent.

"This is not money for Brussels," he said. "This is money that goes back to the member states."

Barroso added that, in many areas, it is simply more efficient to invest at the European level.

"One of the reasons we don't yet have a pan-European energy market is that there are no connections between the national networks," he said. "If you're waiting for member countries to make the [necessary] investments, you can wait forever."

Corruption alleged

According to the EC, only five percent of the EU budget goes "to Brussels." The body claims everything else goes back to projects in member states, albeit with wildly varying profits.

Even though the number of EU jobs has sunk to 1957 levels for the first time ever, the EC must contend with detractors, who take exception with the claim that well-targeted investments lead to growth and employment in all member countries.

Critics say up until now, the EU has given out money too easily. The funds allegedly go to some pointless projects, like highways no one uses, failed businesses and corrupt politicians. Critics also say education, development and agricultural innovation lag - though the biggest beneficiaries of agricultural subsidies, such as France and Spain, take exception to the claim.

Member state revolt?

One complicating factor in the budget debate is that the EU's funds come almost entirely from member states' contributions. The EU's own funds, which come from trade duties, are negligible. As a result, the EC and the European Parliament often have to plead with member states for money.

EC President Jose Manuel Barroso and many members of the European Parliament have pushed for more independent funds that would come from a financial transaction tax or other means. But even if a pan-EU tax is ever implemented - something many experts doubt - German Minister of State Michael Link said the funds should not go to Brussels.

"National budgets have borne the entire cost of stabilizing the eurozone," he said, adding that it is only fair for those countries to get some money back from a financial transactions tax.

Gnashing of teeth

In this environment, one can expect many more clashes. The debt crisis has intensified the debate over the amount and use of the EU budget. Almost no one expects any kind of agreement before an EU summit in December. Yet Finland's European affairs minister, Alexander Stubb, thinks everything will work out fine. He has worked in Brussels for years.

Resolution "more often than not comes dramatically right before the end," he said. "There is much crying, and people shout at one another, but we end up in each other's arms and unite."

It's the same routine with tariff disputes. Positions seem irreconcilable well into the night, but by dawn, a look of conciliation returns to participants' exhausted faces.

Author: Christoph Hasselbach / srs
Editor: Greg Wiser