The European Union’s parliament approved a lower seven-year EU spending cap demanded by government leaders, ending a 29-month political battle dictated by Britain and other opponents of a bigger budget.
The European Parliament endorsed a call by national leaders in February to fix the EU’s budget for 2014-2020 at €960 billion. The sum, down from an original proposal in June 2011 of 1.047 trillion euros and less than the €994 billion committed in the current budget cycle, marks the first shrinking of the EU’s “Multiannual Financial Framework.”
The Parliament backed the spending cut today in Strasbourg, France, in return for a pledge by EU governments to review in 2016 whether the seven-year ceiling is adequate. The 766-seat assembly also won greater flexibility over annual spending.
“It wasn’t the best possible outcome; it was the only possible outcome,” said Alain Lamassoure, French head of the EU Parliament’s budget committee. National governments, which finance about 80 per cent of the EU budget, are due to give their final endorsement of the 2014-2020 plan on December 2nd.
The EU’s seven-year budget guidelines, traditionally a tussle between richer nations that are net contributors and poorer countries mainly in eastern and southern Europe, are a gauge of the bloc’s political mood and coherence. Regional and agricultural aid soaks up around four-fifths of EU expenditure, funding everything from transport networks to farmers’ incomes.
The European Parliament’s vote will have tangible benefits for Irish citizens, Brian Hayes, Minister of State at the Department of Finance, said in a statement. Rural development funding, youth employment initiatives, and support for SMEs will all “be aligned to enhance Government action on the job creation front.”
“Today’s vote by Parliament concludes a negotiated process brokered under the Irish Presidency,” he said. “The final shape of the multi-annual Budget is a pragmatic one that responds to the needs of a Europe emerging from a painful period of contraction. Budget spending reflects this present reality while also meeting the future funding needs at EU level.”
The main areas of EU expenditure will be the Common Agricultural Policy and Rural Development, Cohesion funding, and research and innovation, he said.
European spending is about 1 per cent of EU gross domestic product compared with national spending in the bloc that is around 50 per cent of domestic GDP. The debate over 2014-2020 EU spending took on added significance as the bloc sought to contain the four-year-old debt crisis that has threatened to break up the 17-nation euro.
The accord struck in early February by EU government leaders came at a gathering that lasted more than 25 hours and followed a failed attempt in November 2012. The richest EU countries including Germany and the UK insisted on a reduction, saying it would be consistent with efforts by national governments to narrow their budget deficits.
EU Parliament members argued that European expenditure is a collective investment tool that becomes more important during a time of national austerity. The assembly, due to hold elections next year, had threatened to veto the leaders’ agreement unless governments offered concessions including a mid-term review and more flexibility over annual spending.
“We have had very difficult, protracted negotiations,” said Jean-Luc Dehaene, a Belgian member of the EU Parliament and a former prime minister of Belgium.