EU reaches budget deal

Saturday, December 17, 2005The leaders of the European Union have struck a deal on the 2007-2013 budget. Negotiations were characterized by host country’s Prime Minister Tony Blair as “extraordinarily complicated”.

The biggest issues were different views between France, the UK and rest of the EU. UK wanted to keep it’s high membership discount, negotiated before economic growth made it one of the richest members, while other members wanted it to participate with relatively equal net payment. France’s primary issue was maintaining farming subsidies. Rest of the Europe was mostly interested in modernizing European economy by decreasing both UK’s discounts and France’s subsidies. Germany appeared as a pulling force between France and UK to secure the deal.

France continues to receive it’s highly criticized subsidies. The UK gave up 10.5 billion euros in exchange for a review of farm subsidies in 2008-2009, but the net membership discount will actually increase. Small member states such as Sweden increased their role as largest net payers in relative to output.

Key features in the reached deal:

• Total budget will be 862.36 billion euros, equaling to 1.045% of the EU’s total GDP
• Development aid will be 157 billion euros
• Farm budget will be 293 billion euros

Most see the resulted budget as a poor comproromise, but necessarily for the state of union and financial planning in the new member states.