Walker's World: Battle won, war to be lost

By MARTIN WALKER, UPI Editor Emeritus  |  Feb. 11, 2013 at 12:05 AM
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PARIS, Feb. 11 (UPI) -- Against most predictions and against tough odds, British Prime Minister David Cameron won the battle of the European budget last week. But he may have condemned himself to defeat in the far more important and long-term campaign to reform and secure Britain's future relations with its European partners.

Calling it "a good deal for Britain," Cameron also claimed to have fought off attempts to reduce Britain's special rebate on the funds it pays into the EU budget.

Won by former Prime Minister Margaret Thatcher in tough negotiations in the 1980s, the rebate reflects the fact that Britain as a major food importer and pays disproportionately into the EU agricultural budget. It has iconic status in Britain, although it amounts only to around $5 billion a year, which is almost a rounding error in national finances.

Since the British rebate is written into the EU treaties, it could only be ended with another treaty so it was never really in danger.

But French President Francois Hollande, whose anti-austerity stance was the main loser in the budget debate, warned that the longer-term reforms the European Union is planning would need a new treaty. This would then reopen the issue of the British rebate, Hollande noted.

Still, Cameron is entitled to relish the headlines in the British press, which hailed his victory.

For the first time in its history, the European Union cut the overall budget for the next 7-year cycle. Cameron built a coalition of states, which crucially included Germany, with the argument that the European Union itself couldn't continue to spend as usual while nation states and their citizens were cut from the level of spending over the last budget cycle.

"From my point of view this agreement is good and it is important because it gives us the ability to act in Europe in the coming years," she said German Chancellor Angela Merkel. "It gives us the ability to plan for important projects and with a view to growth and employment."

The budget is cut from $1.3 trillion, a 3.3 percent reduction from the previous 7-year budget. But the research and innovation budget, as a commitment to future growth, going is increased by one-third, from $121 billion to $169 billion.

Most of the cuts take place in the agricultural (down from $450 billion to $372 billion) and the cohesion budget, which finances infrastructure projects and is the main vehicle through which funds are transferred from the richer EU countries to the poorer new members from Eastern Europe.

Although agreed by the heads of government, the budget deal isn't quite complete since it has to be ratified by the European Parliament, where it is likely to run into trouble. The four biggest political groups in Parliament have said they "cannot accept it as it stands because it is not in the interests of Europe's citizens."

European Parliament President Martin Schulz tweeted his own comment: "More and more tasks, and less and less money -- the inevitable result is budget deficits. The Parliament will not go along with this."

The most prominent victim of the cuts was the European Commission's flagship infrastructure project, "Connecting Europe," a proposal to invest more than $70 billion in transport, energy and communications systems, which sees its budget almost halved. Broadband and high-speed internet links were budgeted at $10 billion and were estimated to generate a further $50 billion of private investment.

EU Commission President Jose Maria Barroso called it "a perfect example of the value added that Europe can provide. These proposals will help to build the roads, railways, energy grids and pipelines, and broadband networks that are so important to our citizens and businesses. We are closing the missing links in Europe's infrastructure networks that otherwise would not be built."

This means that while Cameron was able to build a coalition of support for his insistence on cutting the budget, he did so at the price of resentment from many of the smaller and poorer EU members, whose own benefits from the European Union won't be cut. They will remember Cameron's victory when it comes to his planned re-negotiation of the terms of Britain's membership of the European Union.

For Cameron, that renegotiation is the crucial issue, a strategic matter of far greater importance than the budget, which amounts to less than 1 percent of the European Union's gross national product.

Ahead of those difficult negotiations, he will need to build alliances with other EU members on specific issues that he seeks to reform, like the degree of EU control over the financial markets so important to the City of London.

Cameron's success Friday in cutting the budget may turn into an expensive victory for Britain and for Cameron's own hopes to settle Britain's European connection once and for all.

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