The European Union has accepted a small 2% increase in its budget next year, much smaller than its target.
The rise was mitigated by several EU governments, including the UK, which said that demands for a bigger budget were “unrealistic” when compared with austerity measures that most countries are facing.
The European Parliament and Commission were pushing for a 5% increase, but negotiators settled for 2% after talks that lasted 15 hours through Friday evening and into Saturday morning.
The British government said the result of the talks, with the EU accepting a much smaller budget, was an “excellent” deal for the UK.
Mark Hoban, the Financial Secretary to the Treasury, lauded Britain’s staunch opposition to the budget raises, saying that the UK stopped the European Commission and European Parliament’s “inflation-busting proposals.” He also said that the small increase delivers on the UK government’s promise to “freeze the EU budget in real terms.”
Hogan added that the UK’s position against an expanded EU budget was because of member states facing difficult spending cuts at home. Considering the condition that many EU states are in, Britain argued that the demands of 4.9% from the Commission and 5.2% from the parliament were outrageous.
The focus is now shifting to negotiations on the long-term budget for the European Union, which will encompass the periods of 2014-2020. The UK is expected to show similar restraint when facing big budget increases.
However excellent the deal was for the UK, analysts are concerned that there may be a ‘black hole’ in the accounting.
While the 2% increase will mean a budget of 129 billion euros (£110 bn) for the EU, the Parliament previously allowed EU spending commitments to raise to 147 billion euros.
This leaves billions of euros that could lead to a hole in the accounts.
EU Budget Commissioner Janusz Lewandowski said that there is now a real risk that the Commission will “run out of funds” within the next year, and be unable to honour its liabilities and obligations to those who would benefit from EU funds. Funds go to things such as farming subsidies and regional development.
Since poorer members of the EU receive the most development aid, the argument over budget increases is often a ‘rich vs. poor’ debate between nations.
Last year, older and richer EU nations France, Britain, and Germany proposed freezing the EU budget until 2020.