Last updated: April 25, 2012 6:05 pm

Barroso plan for EU budget rise sparks outrage

A proposal for a 6.8 per cent increase for next year’s EU budget put forward by the European Commission provoked harsh reactions from member states that have been slashing their own spending under a Brussels-led drive for fiscal austerity.

José Manuel Barroso, European Commission president, defended his €138bn plan as “an investment in Europe” and promised that the vast majority of the funds would flow back to member states to support growth-enhancing programmes, such as cross-border infrastructure projects.

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But it stirred outrage and incomprehension in many national capitals, where governments have been racing to cut their own budgets to appease financial markets and comply with the EU’s tough new fiscal rules.

The UK Treasury accused the commission of “wilfully ignoring” member states’ calls for restraint. “It is unacceptable for the commission to propose an inflation-busting budget increase when governments across Europe are making difficult decisions on public spending,” said Mark Hoban, the Treasury minister.

A French government spokesperson dismissed the proposal as “impossible, unjustifiable and unacceptable” while a diplomat from one of the EU’s northern member states called it “hilarious”.

The EU’s annual budget-making exercise has always been fraught. But it has turned increasingly hostile in recent years as Brussels’ demands for more money to cope with expanding responsibilities have collided with unpopular spending cuts and taxpayer-funded bailouts in crisis-hit member states.

The political toll of the austerity drive was highlighted this week with the collapse of the Dutch government over its inability to agree additional spending cuts to satisfy EU rules.

The fight over the 2013 budget could prove particularly bitter because it is playing out alongside a much larger battle over the bloc’s next seven-year budget, which will guide more than €1,000bn in spending from 2014 to 2020.

Mr Barroso said the 6.8 per cent increase he is seeking for next year was required to cover a backlog of spending commitments the member states themselves had made for the current seven-year period, and which were now coming due.

He also accused the UK government of dishonesty, saying it had sought more funding from Brussels for a nuclear research programme – something Mr Hoban later denied.

“There is sometimes a complete contradiction between the positions that the governments take publicly – some governments saying ‘we want to reduce the budget’ – and afterwards they are the first to ask for increase of the budget in the projects that are of course for their direct interest,” Mr Barroso said.

The commission has also sought to defuse critics by promising a 1 per cent staff cut next year – marking the first time since the EU’s creation that its headcount would not increase, according to Janusz Lewandowski, the budget commissioner.

Mr Lewandowski said that cutting EU spending would harm vulnerable countries, such as Spain and Slovakia, which had already paid for European projects and were now desperate for reimbursement from Brussels.

Seeking to bolster the commission, Martin Schulz, the European parliament president, joined Mr Barroso for the proposal’s public unveiling.

Mr Schulz said the debate was “about money, but it’s also about the political direction in which Europe is to move”.

He also played down the practical impact of Brussels’ belt-tightening, since EU spending was just a fraction of national budgets. “You don’t believe €1bn more for [German Finance Minister] Wolfgang Schäuble is solving his problems?” he asked.

But Martin Callanan, a conservative British MEP, argued that the proposal sent a bad message to citizens. “On the one hand the commission is telling governments to slash their deficits whilst on the other it is demanding more taxpayer money for the EU,” Mr Callanan said. “To ask for an almost 7 per cent increase is simply out of touch with the real world.”

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