The trillion euro summit

This past week, Herman Van Rompuy, President of the European Council, announced that diplomatic leaders will assemble for an additional summit meeting in November in Brussels to discuss the complex budget issues. These issues were initially meant to be addressed at an October summit but recent discussions and disagreements foreshadowed a long and onerous compromise that would require its own summit meeting. The October and December summits will now focus entirely on the eurozone crisis, without budget woes hovering over the discussions.

The aim of the budget discussion is to outline the goals for the EU’s Multiannual Financial Framework (MFF) that spans from 2014-2020. Although 2014 may seem like a distant date, the EU is at a critical point now in that member states need to work together and agree upon financial objectives for the future so that the actual legislation process can begin. The longer this negotiation process lasts, the greater the risk the EU runs of the current MFF expiring before a new budget is implemented. This could potentially leave funded programmes in limbo.

Given the crucial nature of this negotiation, European leaders decided not to rush the process or limit the discussions. They hence agreed to hold a special summit in November, focusing solely on the budget.

The most obvious disagreements regarding the budget are the size of the MFF and how the available funds will be distributed across policy areas. Some countries like Britain, the Netherlands and Sweden do not want to spend beyond the rate of inflation and, thus, want to decrease the proposed budget. They see this as the only way to be consistent with the consolidation efforts in other member states.

On the other side of the debate is a group of member states, including Malta, that aim to preserve substantial funding for Europe’s cohesion policy. Emphasising the importance of reducing disparities among member states and stimulating economic growth across the continent, these countries regard the cohesion policy as a vital tool to achieve these objectives.

They therefore want to prevent a reduction of funds to this policy in order to ensure that the European Union continues to create the best possible opportunities for citizens across all of its regions.

The proposed MFF is set at about €1 trillion over a seven-year cycle, which is the maximum amount that the EU is allowed to spend over this period. The goals of the MFF are to determine expenditure limits, evaluate spending programmes and dictate how those programmes should be financed. These serve as legally-binding guidelines for the budget committee when deciding how much to spend on which programmes.

While the MFF simply outlines overall expenditure limits, the annual budget, functioning within these limits, outlines expenditure objectives. This means the budget more specifically allocates money to the different programmes.

The MFF plays a crucial role in determining the financial framework of the European Union. Its inception was a result of the financial crises in the late 1970s and 1980s, when a drop in revenue and an increase in expenditure led to financial instability. Since the European Union cannot run a deficit, it is the role of the MFF to balance revenue against expenditure.

In light of the economic downturn, it is imperative that European leaders continue to invest time and thought into creating an effective MFF. Only an effective MFF will be able to deliver on its goals to stimulate economic growth, increase competition and boost job creation. These objectives must remain at the centre of discussions, guiding the decisions taken by the European member states.

The budget negotiations also provide Malta with the opportunity to demonstrate its firm commitment to deliberate and effective decision-making.

The decision to hold a summit dedicated entirely to the EU’s financial framework shows how serious the European Union is taking this matter. This promises to be a crucial negotiation process and one in which the EU can prove that it is capable of functioning as a strong unit. Although it can be easy to dwell on the negatives and focus on the frustrations of the current financial situation in the European Union, it is important to remember that this summit, first and foremost, allows for a stronger focus and increases the chances of devising the best possible solutions.

The November summit meeting gives leaders additional time to think about the issues at hand and to make informed decisions, without the distraction of other agenda items. By forging through the initial frustrations, this summit will ultimately help remind everyone of the purpose of the MFF, preparing Europe for the challenges that lie ahead.

David Casa is a Nationalist MEP.