During a meeting of the member states’ finance ministers, on 15 May, ten countries and Croatia supported what they described as a “justified and strongly needed increase” in the level of payments for cohesion policy as proposed in the European Commission’s draft 2013 EU budget. A handful of other countries are also sympathetic to this position. This group will clash head on with a powerful blocking minority of net contributors seeking to significantly slim down the EU executive’s proposal. In the previous two years this latter bloc got the upper hand over both other member states and Parliament, managing to limit the rise in payments in the EU budget to the rate of inflation. This time round, the stakes have been raised higher and the talks should be more heated: this annual budget is the last one of the current multiannual financial framework (MFF) and at the same time negotiations are underway to reach an agreement on the 2014-2020 long-term EU budget.

The Commission proposes a 6.8% increase in payments in the 2013 EU budget compared to this year (+€8.8 billion) ⁽¹⁾. A massive chunk of this rise is due to the €5.13 billion (+11.7%) boost in payments for Cohesion and Structural Funds (Heading 1b), which will no doubt be hotly debated.

On one side, a group of ten member states (Bulgaria, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania and Slovakia) have signed a joint statement defending this boost of cohesion policy payments. Very much in line with Budget Commissioner Janusz Lewandowski’s arguments, they underline that the “multiannual character of cohesion policy implies a rising profile of payments towards the end of the financial perspective”. These member states claim the EU’s “credibility” is at stake: “it is crucial to respect commitments made in the past”.

“SELECTIVE DEFAULT”

Poland, which read out the pro-cohesion statement during the Ecofin meeting, went a step further, raising the spectre of default. “A failure to meet one’s debt obligation could, by some who are maliciously inclined, be called default,” Polish Minister of Finance Radek Rostowski told Europolitics. “I cannot imagine the EU as a whole would want to go down a path that could be construed as selective default,” he added.

The ten plus one so-called ‘cohesionists’ have additional allies that did not sign up to the statement. Italy has “a lot of sympathy” for its content, so does Slovenia. Much like the signatories, the Czech Republic believes boosting cohesion payments might help address the issue of outstanding commitments (RALs), which total €207 billion. Belgium, Ireland and Greece also defended the Commission’s proposal.

COLLISION COURSE

This group of cohesionists and sympathisers will be on a collision course with a net contributing blocking minority. Their positions – all seeking to curb the proposed increase – range from limiting the 2013 EU budget to the “same nominal level” as this year (the Netherlands) to vaguer statements calling for the “stabilising” of expenditure (Austria). The UK representative believes that the 6.8% increase in payments “does not recognise the [austerity] context in which we are operating”. He therefore called for “very significant cuts” and re-priorisation. In a similar vein, Sweden and Denmark, respectively, blasted the Commission’s proposal as “quite unrealistic” and “clearly too high”. Stockholm will attempt to “lower the increase [in payments] to levels lower than inflation”. Germany, not represented during the debate, believes that the EU executive’s proposal is “too high,” according to a diplomat. Despite the early offensive of the cohesionists, “we still feel in quite good company and as in the last years we will certainly not end up [with the Commission’s proposed increase]”, said the diplomat.

France’s position, with a new president and a cabinet of ministers still not formed, is unclear. Spain is at a crossroads between calls for commitments to be paid and fiscal consolidation requests: “we see the merit of arguments on both sides”.

Despite calls to do so by certain member states, the parallel negotiation over the long-term budget will not be fully separated from the annual one. Indeed, the 2013 EU budget will probably be “an indicator” of what the overall level of the 2014-2020 MFF could be, says one source. The European Parliament will be tempted to link the two together. Another item that will be tied to the 2013 EU expenditure talks is the more-than-likely amending budget to cover for the abnormal shortfall in payment estimated at €5-6 billion in the current budget.

The Council is scheduled to adopt its position in July and Parliament in October or November.

⁽¹⁾ The draft budget for 2013 foresees a total of €137.9 billion in payments, or 1.03% of the EU’s gross national income (GNI), and €150.9 billion in commitments, ie a 2% bump compared to 2012 and 1.13% of GNI