Thank God for the Budget

The results of the last EU Council may not please everyone. But thank God it approved the budget. Following the negative referenda results on the European Constitution in France and the Netherlands, Europe just could not afford another ducking. Now the European Parliament's consent is awaited.

The budget deal is a reminder that in politics there are no perfect solutions. The EU budget is a compromise: the UK sacrificed part of the refund it receives from its contribution to the EU budget in return for a promise of a budget review in the next two or three years.

The budgetary decision taken by the European Council meeting in Brussels last month means that, once the budget is approved at all stages, the EU will have the power to acquire €862.4 billion to spend from 2007-2013. This represents 1.05 per cent of the combined GNP (or gross national income, as it is called these days) of the 25 EU member states measured at constant 2004 prices. Hence the €862.4 billion will increase in line with price inflation. These increases will be automatic.

Where will this money be spent? A big part of it, 8.4 per cent, will go to improve the Union's competitiveness to stimulate growth and employment. Nearly 36 per cent will go for the development of the backward regions of the Union, the structural and cohesion funds.

Just over another third will be spent on the preservation and management of natural resources, including agriculture. The rest will be spent on various internal policies, including the crucial area of "freedom, security and justice", which also covers immigration.

The EU will spend 5.7 per cent of its overall budget on external aid to all non-member countries. What would have been Malta's share of this minuscule sum had it not joined the EU?

The 'rebate' or refund to the UK will be reduced. The UK gives up €10.5 billion, or roughly 20 per cent of the rebate it would have otherwise received over the seven years. The rebate is still set to rise from its current level of about €5 billion on average, over the last few years. However, it will be smaller as a proportion of the UK's net contribution to the EU budget.

The UK secured agreement on a review of the budget, including the wasteful Common Agricultural Policy (CAP). Indeed, the European Commission has been instructed to hold a "full and wide-ranging" review of all EU spending, including the CAP and the British rebate, and to draw up a report in 2008/9.

The EU member states will be involved in all aspects of the review. However, they will still be able to use their veto. It is important for Malta to begin to prepare for this review, which should lead to a reform that will make it better for the EU to achieve its objectives in the 21st century.