EU mends differences, OKs budget

Commitment to success could be a model for U.S.

By Dale R. Herspring

Americans who are frustrated at the budget dispute in Washington and who fear that Democrats and Republicans will not reach an agreement before sequestration takes effect March 1 ought to consider what has just happened in Europe. Developments there suggest that even the most combative foes can reach agreement if they have the will to do so.

After a long and tortuous battle and much to the surprise of observers, the European Union (EU) agreed on a budget for the next seven years.

When leaders first discussed their long-term budget last November, French President Francois Hollande said only 30 billion euros ($40.59 billion) separated members of the EU. In spite of such optimistic talk, as the time came closer to approve the budget, the worry birds began to appear. One of them was German Chancellor Angela Merkel, who is a hard bargainer (as the Greeks have learned). What if Merkel decided to play hardball, as she suggested many times she might? 

Merkel was not alone in wanting a lean budget.  British Prime Minister David Cameron also did. In fact, one British commentator said Cameron was the leader of the “lean brigade” regarding EU spending.  Other countries, including the Netherlands and Sweden, are also in the “lean brigade.”

Back in November the EU Commission asked for a 5-percent increase in its budget. That would have put the budget at 1.033 trillion euros. That was quickly trimmed back to 973 billion euros, but even that was too much for Germany, the UK and some others. They demanded further cuts.

Merkel made clear to anyone who was thinking that the Germans would bail the EU out that it was not going to happen.  On the other side of the table was France’s Hollande, who was determined to resist any cuts that would undermine projects he believed in. 

If there was good news before the meeting of European leaders, it was that they agreed on what is called the Common Agricultural Policy (CAP).  This policy is critical for the French, who rely on it to support their small, inefficient farms. It is also important for some of the countries of Eastern Europe.  The British, who resent the French policy of grabbing as much as possible from the CAP, were not happy, but were willing to live with the CAP for now.

At the budget summit Feb. 7 and 8. Jose Barroso, head of the EU, called on members to work together.  As he put it, “Further delays will send out a very negative message in this time of fragile economic recovery.  The risk is that the positions will harden and will be even more difficult to overcome.” One factor influencing the EU is its division into two groups — affluent nations and those that are struggling to pay their bills.

On Feb. 7 there was an all-night meeting. The main negotiator was former British Prime Minister Tony Blair. Most surprising, the meeting produced an agreement. The new budget ceiling will be 96 billion euros. It is the first time the EU’s budget was cut. Cameron called it “a good deal for Britain.” He continued, “I think the British people can be proud that we have cut that seven-year credit card limit for the EU for the first time ever.” Hollande said it was a “good compromise,” and Merkel was also pleased, noting that it represented a 3-percent cut over the previous budget. The German newspaper Der Spiegel headline said “The EU Reductions: A Successful Budget.” The spending cuts are primarily for cross-transport, energy and telecom projects — and perks for EU officials, something the UK has long pushed.

The agreement must be approved by the European Parliament. The vote is difficult to predict. The president of the parliament has said he will not accept excessive cuts.  In fact, it appears that the parliament will vote in secret, making it difficult for countries to exert pressure on their representatives.

The EU agreement, assuming parliament passes it, demonstrates that even difficult agreements can be reached if there is a will to do so.  The issues here were international but had tremendous domestic implications for all concerned.  If 27 countries with 27 agendas can overcome their differences, it would seem possible for 535 members of Congress from the same country to find ways to agree on a budget.  At least we can hope that members of Congress are as smart and willing to compromise as were the representatives of 27 very different countries.

Dale R. Herspring, a University Distinguished Professor and a member of the Council on Foreign Relations, is a retired U.S. diplomat and Navy captain.

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