Schroeder prepares for cashbattle at crunch EU summit

15th June 2005, Comments 0 comments

15 June 2005, BERLIN - Battles over money are always bitter in the European Union and the bloc's Big Three - Germany, Britain and France - are set to slug it out over who gets what and who's going to pay at a summit opening on Thursday.

15 June 2005

BERLIN - Battles over money are always bitter in the European Union and the bloc's Big Three - Germany, Britain and France - are set to slug it out over who gets what and who's going to pay at a summit opening on Thursday.

A show-down is expected at the Brussels meeting amid intense pressure on leaders of the 25-nation bloc to agree a budget for the period 2007 to 2013 after rejection of the European Union (EU) constitution by French and Dutch voters earlier this month.

The sums involved are enormous: EU spending for the seven-year period is estimated at about EUR 800 billion.

It's not just that big money is involved. Financial issues are bound up in such national legends as former British prime minister Margaret Thatcher swinging her handbag and demanding "I want my money back!"

Back in 1984, EU leaders bowed to the Iron Lady and agreed a British rebate to compensate London for the low amounts of cash received by the relatively small number of UK farmers.

Since then Britain has been paid a multi-billion euro sum which varies each year but is expected to hit GBP 4.3 billion (EUR 6.5 billion) in 2005.

But now it is the other 24 EU members who are in effect telling London they want their money back.

British prime minister Tony Blair counters by insisting he will only consider changes to the rebate system if France accepts cuts to agricultural subsidies.

The money paid to Paris is even more staggering: about EUR 10 billion a year flows from Brussels to French farmers.

With agriculture subsidies devouring 40 percent of the annual EU budget of EUR 100 billion, Blair argues the Union's entire financing system must be revamped.

But here again the issue is caught up in national emotions with the almost sacred status accorded to farmers by the French public and leaders, as anybody who has seen French president Jacques Chirac at an agricultural fair can attest.

Chirac has thus dug in his heels and declared that farm subsidies are non-negotiable.

President Chirac has crucial backing on this from his close ally, German chancellor Gerhard Schroeder, who bluntly reminded Blair at a news briefing in Berlin on Monday that all EU leaders unanimously approved a farm spending package through 2013 at a summit two years ago.

"We Germans stick to the agreements we have struck," said Schroeder while Blair stood at his side looking almost dumbstruck.

Schroeder's position on EU money has been that Germany cannot pay more to Brussels. Germany is the biggest EU paymaster, contributing 20 percent of the bloc's budget.

The German principle, long set in cement, was that Berlin would not pay more than 1 percent of the combined EU gross domestic product (GDP).

Shortly after his election in 1998, Schroeder slammed the EU for "frittering away" his country's cash and vowed the post-1945 era of German chequebook diplomacy was over.

In 1999, however, Chancellor Schroeder backed down at the last EU budget summit which he hosted in Berlin. A deal was clinched after a 28-hour marathon session when Germany agreed to French demands for more money.

And although prospects for a new budget deal at the upcoming Brussels summit may look dim, history may be about to repeat itself.

"Germany is ready to move on finances," says Schroeder without giving any further details.

Last week one of the chancellor's most senior aides told reporters that proposals by Luxembourg, which holds the rotating EU presidency, would add about EUR 10 billion for Germany's bill through 2013.

The official said Germany might agree to pay more if a big chunk of this money flowed back to the country from EU coffers. Berlin is especially keen to boost aid for depressed regions in eastern Germany, especially along the Polish and Czech borders.

A media report at the weekend said Schroeder was ready to offer Brussels a net increase in contributions of EUR 500 million.

Schroeder's sudden flexibility on this issue can best be understood in terms of his re-election bid, said a German official talking on the condition of anonymity.

After calling an early general election expected for September, the German leader is battling dismal poll ratings as his opposition Christian Democratic challenger, Angela Merkel, has surged to a commanding lead.

"He needs a big foreign policy victory," said the official adding that this was all the more urgent because no improvement in the weak German economy or unemployment of almost 12 percent was expected until next year.


Subject: German news

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