EU Finance Ministers yesterday remained deadlocked over the reform of the Union's budgets, with member-states barely able to agree an overall spending ceiling of 1.27 per cent of GDP, according to the Minister for Finance, Mr McCreevy.
Expressing disappointment, Mr McCreevy said ministers had simply repeated their own national preoccupations. However, he did indicate a significant shift in the Irish position by backing reform of the contribution system.
He said he would support a system that would link member-states' net contributions to GNP, a move which will be seen in Bonn as a willingness to engage German concerns about the unfair burden they face.
The German Presidency will now prepare a report on the means of providing a general budget corrective mechanism. Mr McCreevy was dismissive of suggestions by the French Finance Minister, Mr Dominique Strauss-Kahn, that Ireland should lose cohesion funding because it had qualified for the euro. That was not a requirement of the treaty, Mr McCreevy said.
Of specific concern to observers was the message sent to farm ministers. Although the meeting failed to set a framework for the discussion of the farm reform package, the message was that "there has got to be a stabilisation of expenditure", according to the German Finance Minister and President of the Council, Mr Oskar Lafontaine.
The Presidency hopes to advance the farm talks substantially in the week beginning on February 22nd. A three-day meeting of farm ministers is to be followed by a special summit on the issue.
Finance ministers had been expected to agree an overall ceiling on farm spending for 2006. Leaving this precise figure to their agriculture colleagues is expected only to make agreement more difficult. However, despite the ostensible deadlock, the debate on Agenda 2000 is beginning to focus on two means of reducing spending that also reduce the contributions of those, like Germany, who feel they pay too much.
In agriculture, the French have responded to calls for the partial renationalisation of farm payments with their own proposal for "degressivity" which has won widespread support.
In essence this involves cutting the value of direct aid payments to farmers in line with increases in farm productivity. The net effect should, in theory, leave farm incomes stable while producing major long-term savings to the budget, particularly in the cereals sector.
Small farmers would be exempted from the clawback, according to the French and the Commission. Mr McCreevy yesterday urged fellow ministers to leave the discussion of this option to farm ministers.
On the overall budget, a substantial majority of member-states now favour "stabilisation" of spending at 1999 levels in real terms. To do so while maintaining farm reform would require cutbacks of up to £35 billion in the overall structural funds package. However, the British Chancellor, Mr Gordon Brown, said the thrust of yesterday's discussion was overwhelmingly that the EU must take on board the sort of financial stringency which member-states have had to endure.
