EU Parliament Chief Negotiator Backs Budget Cut for Bloc

The European Parliament’s chief budget negotiator accepted a lower seven-year spending ceiling demanded by government leaders in return for a mid-term review, setting the stage for a push to win the full assembly’s support.

Alain Lamassoure, a French member of the European Union legislature, accepted a proposal by national leaders in February to fix the EU’s budget for 2014-2020 at 960 billion euros ($1.3 trillion). The sum, down from an original proposal of 1.047 trillion euros and less than the 994 billion euros committed in the current budget cycle, would mark the first shrinking of the EU’s “Multiannual Financial Framework.”

Lamassoure, a member of the 27-nation Parliament’s Christian Democratic group, the assembly’s biggest, endorsed the spending cut yesterday in Brussels after winning a pledge from EU governments to review in 2016 whether the seven-year ceiling is adequate. Other members of the Parliament’s negotiating team refused to sign off on the deal, raising questions about whether the full 754-seat assembly will give its approval in a vote due in July.

“We cannot accept a seven-year EU budget that ties our hands and cuts our ambition in important EU policy areas,” Hannes Swoboda, Austrian leader of the Parliament’s Socialists, the second-largest group, said in an e-mailed statement.

Budget Guidelines

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.

European spending is about 1 percent of EU gross domestic product compared with national spending in the bloc that is around 50 percent of domestic GDP. The debate over 2014-2020 EU spending has taken on added significance as the bloc seeks to contain the three-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. The richest EU countries including Germany and the U.K. insisted on a reduction, saying it would be consistent with efforts by national governments to narrow their budget deficits.

National Austerity

EU Parliament members have argued that European expenditure is a collective investment tool that becomes more important during a time of national austerity. The assembly, facing elections next year, has threatened to veto the leaders’ agreement unless governments offer concessions including a mid-term review and greater flexibility over annual spending.

“Priorities from Parliament have been taken on board,” Lamassoure, who is chairman of the assembly’s budget committee, said in an e-mailed statement. “However, Parliament is not in a position to give its final approval at this stage, given that the positions of the political groups in the negotiating team are different.”

Guy Verhofstadt, Belgian leader in the EU assembly of the pro-business Liberals, the third-biggest group, said yesterday’s deal showed “little progress” and national governments should “think twice” in “this game of inter-institutional brinkmanship.”

Helga Truepel, German budget spokeswoman of the Greens, the EU Parliament’s fourth-largest faction, said she would recommend that her group “reject this weak agreement.”

Ireland, which holds the EU’s rotating presidency and struck yesterday’s deal with Lamassoure on behalf of the bloc’s national governments, urged the full Parliament to give its backing.

“This is a balanced package,” Irish Deputy Prime Minister Eamon Gilmore said in an e-mailed statement. “This deal is about putting in place a robust 960 billion-euro budget for investment.”

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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