Cut-backs proposed in EU’s 2014 budget

Proposal to cut spending next year by 5.8%, with regional development the hardest-hit area.

The European Commission is proposing that the European Union should cut its spending next year by 5.8%, with the cuts to be felt in all areas other than administration. 

The bulk of the cuts – €7.4bn out of the €8.8bn in commitments – would, however, be in one area: the Union’s funding for regional development. This would amount to a 13.5% annual drop in the cohesion policy’s budget.

The proposal for the 2014 budget adopted by the college of European commissioners yesterday (26 June) sets the EU’s spending commitments for next year at €142.0 billion and actual payments at €135.9bn, compared with €150.8bn and €144.3bn in the 2013 budget.

The 2014 budget is the first annual budget under the multi-annual spending plan for 2014-20, which is still the subject of hectic last-minute negotiations between the member states and the European Parliament.

Starting point

As a result, Janusz Lewandowski, the European commissioner for financial programming and the budget, based his proposals on a deal that was reached by member states’ leaders in February but subsequently rejected by the Parliament. In his presentation of the draft to the Parliament’s budgets committee immediately after its adoption by the college of commissioners, Lewandowski refused to be drawn into a discussion of what would happen to the 2014 budget should there be no agreement on the multi-annual spending plan. “Please take [the draft] as a starting point,” Lewandowski told the MEPs. “We have time to amend what is proposed here to the results of negotiations between the Parliament and the Council.”

Alain Lamassoure, a centre-right French MEP who chairs the budgets committee, said that the budget cuts ran counter to the need for investment in economic growth. “This is most troubling and must give us pause about the way these things are timed.”

Lewandowski said the sharp cuts to cohesion spending reflected the nature of the EU’s multi-annual budget cycle, which sees payments rise over the seven-year period and commitments start lower because projects remain under preparation.

In the Commission’s 2014 proposal, cohesion-policy commitments decrease by 13.5% and payments by 9.3%. Included in that figure for commitments in 2014 are €3.4bn for a new youth-employment initiative, half of whose commitments are to come from the cohesion-policy sub-heading.

The agreement reached by national leaders at February’s European Council on the 2014-20 multi-annual financial framework cut cohesion spending by €29.7bn, or 8.4%, compared with the current spending cycle (2007-13).

Security cuts

The biggest cut compared with the 2013 budget – 11.9% in payments – is to the ‘security and citizenship’ heading, but that heading makes up just 1.2% of total payment appropriations for 2014. The EU’s budget for external action is cut by 8.2% in payments, which suggests that payments to some countries will suffer if the EU is to meet its recent promise of €400m for Syrian refugees.

Anne Jensen, a Danish Liberal who is Parliament’s rapporteur on the 2014 budget, said: “How can we explain the drop in ‘Global Europe’ when we see the situation in Syria?”

Lewandowski said that half of the proposed payment appropriations – €70bn – was required to cover commitments already made, reducing outstanding payments at the end of the current multi-annual budget cycle, 2007-13, by around one-third.

He said that the main reason for the 2.1% increase in the administration budget were rising pension obligations – a matter that is largely beyond the control of the Commission. Spending on pensions is set to rise by 7.2%, while expenditure for schools for the children of diplomats and EU officials, which falls under the same budget heading, is supposed to be cut by 5.6%.

This prompted criticism from MEPs on the budgets committee. “I find it horrifying that the cost of pensions is skyrocketing and funding of European schools is going down,” said Sidonia Jedrzejewska, a centre-right Polish MEP.

“It is difficult to be enthusiastic about the 2014 budget because we know there will be less money for the EU in the time to come,” Je?drzejewska said.

“We know what the atmosphere is, and it is our task to make the best out of the situation.”

Budget timetable

Adoption of the EU’s annual budget is a closely scripted exercise based on the Union’s Lisbon treaty and on a ‘pragmatic’ timetable agreed between the Commission, the Council of Ministers and the Parliament.

A budget proposal by the European Commission should, under the treaty, be adopted by 1 September and by early May according to the pragmatic calendar. The Council of Ministers is now expected to agree its position on the draft budget by the end of July (although under the treaty it has until 1 October). The Parliament must articulate its position within 42 days of the Council announcing its position.

At that point, the institutions convene a conciliation committee, which then has 21 days to agree a final, joint version. Unlike the multi-annual budget, which requires unanimity among the member states, the annual budget can be adopted by a qualified majority of member states.