EU budget crisis-more trouble ahead!

As if the crisis over the failure of France and The Netherlands to ratify the new EU Constitution wasn’t serious enough, European leaders meeting in Brussels for an EU summit are freaking out completely over the proposed EU budget for 2007-2013. There are two main points of contention. First, the so-called “rebate” negotiated for the UK by Margaret Thatcher’s government in 1984. This arrangement reduces the UK contribution to the overall EU budget by almost 5 billion euros annually and was agreed to by the (then 10) EU nations in recognition of Britain’s position at the bottom of the EU economic food chain. At that time the UK had the lowest per capita GDP, significantly lower than either France or Germany. The argument coming from the rest of the EU, is that since the tides have turned and the UK now sits at the economic summit of Western Europe, the raison d’être for the rebate is gone and Britain should cough up the 5 billion euros. The money is acutely needed as the overall economic situation in Western Europe is poor and the newer EU additions from Eastern Europe have particularly weak economies and need assistance. Needless to say, Tony Blair has told his colleagues to stuff themselves, he’s keeping the rebate!

To be fair to Blair, he did agree to discuss further reductions in the rebate (it was reduced somewhat at an earlier EU summit) if the French would consider drastically reducing their enormous EU farm subsidies which total over 13 billion euros a year. French president Jacques Chirac said “Non” (quelle surprise!). Current EU president, Jean-Claude Juncker, had this to say yesterday, "My enthusiasm for Europe has suffered a profound shock…. People will tell you that Europe is not in crisis. It is in a deep crisis." Juncker is the prime minister of Luxembourg which currently holds the rotating EU presidency. Next up as EU president beginning in July, Tony Blair!

Pretty gloomy stuff. However, I did hear an analyst on ITV (a British news service) point out that as far as the Constitution went, the EU does have treaties in place (the most recent being the Treaty of Nice) that are arguably working reasonably well in lieu of a formal constitution and that the budget being discussed at the summit is not to take effect until 2007, so there is some time to get these messes straightened out!