Brussels will have a budget on 1st January

The 2011 budget is the first budget to be adopted under the Lisbon Treaty, which has conferred further powers on the European Parliament. The Conciliation Committee has not reached an agreement on these issues before the deadline - 15 November. Consequently,  the Commission had to put forward a new draft budget for 2011. The European Commission adopted a new draft EU budget for 2011, with no time, on 26 November, as a last attempt to reach an agreement between the European Parliament and the Council as quicker as possible and, possibly, by the 17th December so that the EU has a budget on 1st January. If the EU 2011 budget was not approved before the end of the year spending would have to be frozen at 2010 levels. Obviously, Brussels does not want to work under the system of the "provisional twelfth."

The Commission’s proposal is in line with the Council and European Parliament positions expressed at the conciliation period. On the same day, the President of the European Commission, Jose Barroso, has sent a letter to Jerzy Buzek, President of the European Parliament and Yves Leterme, President of the Council, on the Commission's new proposal, calling on the MEPs and the Council to agree on the draft budget before the end of the Parliament's December session.

The Commission, the European Parliament and the Council Presidency all worked at speed of light so that a deal could be reached before the end of the year. In fact, on 6 December the Belgian Presidency and the European Parliament, at a behind closed doors trilogue meeting, reached an agreement on the size of the 2011 budget and several technical aspects. On 10 December, the Council formally adopted its position accepting the Commission draft EU budget for 2011 presented last month and endorsed the informal agreement reached between the Belgian Presidency and the European Parliament.

It is important to mention that the UK Parliament did not have the required eight-week period to scrutinise the Commission's 2011 draft budget proposed last month.

On 15 December, the European Parliament formally approved the Council's position, hence the budget for 2011 is considered adopted. The MEPs accepted, therefore,  €141.8 billion in commitment appropriations corresponding to 1,13 % of GNI and representing an EUR 332,0 million increase comparing to 2010 (an increase of 0.2 per cent compared to the 2010 budget) and €126.5 billion in payments appropriations which corresponds to 1,01 % of GNI, representing an increase of EUR 3 571,2 million comparing to 2010 budget (an increase of 2.9% compared to 2010).

The Council and the MEPs have agreed to limit the total amount of payments for the 2011 EU budget to €126.5 billion. Nevertheless, such arrangement will increase the UK’s contribution to the EU budget by about £435m.

It is important to mention that the Commission reiterated its position that “this level of payments can only be agreed to, if it is accompanied by the commitment of the budgetary authority to act promptly on requests for additional payment appropriations through amending budgets or transfers, in order to avoid any shortfall in payment appropriations.” In fact, there is a Joint Statement on payment appropriations by the Council and the European Parliament where they asked “the Commission to submit an amending budget if the appropriations entered in the 2011 budget are insufficient to cover expenditure…” Moreover, they committed to “take position on any draft amending budget as quickly as possible in order to avoid any shortfall in payment appropriations.” Consequently, we should expect the budget to be amended several times during 2011.

The European Parliament has insisted to link the negotiations on the EU 2011 budget to issues that have nothing to do with it, such as the European Parliament's involvement in the negotiations on the next multiannual financial framework, the EU own resources as well as the issue of the flexibility for the revision of the multiannual financial framework. According to a recent press release the European Parliament was ready to "facilitate an agreement on the 2011 Budget and related elements within a very tight timeframe" but providing its demands are met. During the Conciliation Procedure, a group of member states lead by the UK refused to concede to the European Parliament unacceptable demands, which would have granted further powers to the MEPs. However, the European Parliament has also reached agreement with the Council and Commission as regards several of its political demands.

The main controversial issue during negotiations has been the MEPs demands for a greater say in future negotiations on the EU's multi-annual financial framework after 2013. In fact, the European Parliament has only accepted the EU 2011 budget in exchange of having a greater role in the future negotiations on the EU's multi-annual financial framework. The MEPs recalled that the Lisbon Treaty provides in Article 312, 5 “Throughout the procedure leading to the adoption of the financial framework, the European Parliament, the Council and the Commission shall take any measure necessary to facilitate its adoption.” Hence, according to the European Parliament “the three institutions must agree on a working method, making clear how to put this into effect.”

The financial perspectives have been the subject of the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure. The Lisbon Treaty has provided for a legal base for it, now called "multiannual financial framework." Under the TFEU, the Council, acting unanimously, through a special legislative procedure (assent procedure) shall adopt the multiannual financial framework, after obtaining the consent of the European Parliament. The European Parliament may accept or reject the proposal but cannot amend it. However, the European Parliament has suggested having three MEPs participating in all negotiations, as observers, in order “to facilitate adoption in Parliament of the text proposed and avoid a deadlock.” But, Member States, particularly the UK, Netherlands and Sweden have been against such demands and pointed out that such demands go beyond than what is foreseen in the Lisbon Treaty.

Barroso, in the letter abovementioned, asked to the Presidency of the Council to “clarify in the coming days with upcoming Presidencies their intention to hold regular exchanges of views with the European Parliament on the next Multiannual Financial Framework and related proposals on the basis of articles 312.5 and 324 of the Treaty.” The Belgium EU presidency and the next four EU member states to hold the rotating presidency, Hungary, Poland, Denmark and Cyprus agreed on a political declaration, committing to ensure the European Parliament participation in the EU's multi-annual financial framework negotiations. It is a declaration, therefore, is not legally binding on the member states, but it would grant MEPs a greater say in the upcoming negotiations on the new the multiannual financial framework.

The European Parliament has also demanded member states, in return of decreasing the budget, “open up discussions on new sources of income for the EU”, including a EU wide tax, and, obviously, to be involved in such discussions. However, it seems that the European Parliament demands go beyond the Lisbon Treaty 's provisions. Under the provisions concerning the system of own resources, the Council acting unanimously, on a proposal from the Commission, through the special legislative procedure (consultation), shall adopt a decision setting up provisions concerning the system of own resources of the Union. Therefore, the Lisbon Treaty has retained the European Parliament marginal influential role. The European Parliament must be consulted before the Council vote on the Commission proposal, but the Council is not bound by the Parliament’s opinion. Moreover, it is provided that such “decision shall not enter into force until it is approved by the Member States in accordance with their respective constitutional requirements”.

The MEPs asked the European Commission to present a proposal on new own resources and they also asked for “a commitment from the Council to discuss these proposals with Parliament within the negotiating process of the next long-term budget framework.” In fact, the European Commission has already announced that it will present a legislative proposal on “own resources” before the end of June 2011. Barroso has said as regards the Union's own resources, “the Commission will provide the necessary information to the European Parliament, and the Council, in order to pave the way for an effective consultation of the European Parliament under article 311 of the Treaty on a new Own Resources draft decision that it will propose together with the multiannual financial framework in June 2011 and to facilitate the implementation of the Treaty provisions in this area.

Presently, the Council may adapt the multiannual financial framework within a margin for unforeseen expenditure by up to 0.03% of the Gross National Income (GNI), but, it seems, the European Parliament wants to change this. The European Parliament has stressed “Moving funds between different parts of the budget is currently very difficult.” Hence, the European Parliament wants “the budget framework (=limits) for 2012 and 2013 to be flexible enough to make room for the new tasks the EU has taken on since the framework was decided five years ago.” According to the MEPs “the possibility to move funds from one budget area to another” should be increased. The MEPs wanted, therefore, an agreement “on genuine flexibility mechanisms that would be decided by the EP and by qualified majority in the Council.

On 25 November Coreper reached an agreement on flexibility within the current multiannual financial framework. The Member States' ambassadors to the European Union agreed to establish, within the new regulation on the current MFF, a ‘contingency margin’ of up to 0.03% of the EU’s gross national income (GNI), €3.4 billion, that can be mobilised with a qualified majority decision of the Council and approval by the MEPs. However, the UK and other member states have initially asked for this facility to be decided by unanimity. The Member States' ambassadors agreed therefore to drop some Member States’ calls, including the UK, for unanimity voting on the flexibility mechanism. The agreement excludes the use of this mechanism above the margins available in the various headings. This is already in place. However, for several MEPs this was not enough. According to Inga Rosinska, the EP president’s spokesperson, the MEPs “…still don’t find this entirely satisfactory as it excludes the use of flexibility above the margins…”

No agreement has been reached as regards the MEPs’ demands for greater flexibility within the current 2007-13 financial framework. The Greens, the Socialists and Democrats (S&D) and the Liberals (ALDE) voted against the Council proposal on flexibility. Hence, this issue will be decided next year.

Unfortunately, in this way Brussels was able to avoid the application of the "provisional twelfths" mechanism. If the 2011 budget was not adopted before 1 January, the Treaty provides that “(…) a sum equivalent to not more than one twelfth of the budget appropriations for the preceding financial year (2010) may be spent each month in respect of any chapter or other subdivision of the budget (…)” but "that sum shall not, however, exceed one twelfth of the appropriations provided for in the same chapter of the draft budget." In this case, the EU Institutions would have to work under the system of the "provisional twelfth" which means, as explained by the European Commission “For each chapter of the budget, the corresponding amounts for 2010 are divided in 12 equal parts. These "twelfths" are available monthly, nothing less, nothing more.” Such outcome would have been welcomed. The majority of EU member states have had to introduce serious spending cuts, so the EU budget should also face more austerity. But, at a time of severe strain on the majority of Member States’ public finances, there would be an increase on 2.9% in the 2011 budget compared to 2010.

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