Germany and Netherlands threaten to use muscle to cut their budget contributions

Date: 18/06/1998

By Tim Jones and Peter Chapman

THE German and Dutch governments are threatening tough measures unless their 'excessive' contributions to the EU are cut during the coming reform of the Union's finances.

Chancellor Helmut Kohl warned fellow European leaders at their Cardiff summit this week that Germany's concerns would have to be addressed or the Agenda 2000 package to prepare the Union for eastern enlargement would founder.

On German television, he even threatened the 'nuclear option' of withholding payments to the EU unless the country's 11-billion-ecu net contribution was reduced.

“In the long term, the high net contribution of Germany cannot be justified, and what I cannot justify, I will also not do,” he said, adding that unless Bonn received a promise to cut the contribution by March next year, “we won't pay anything.”

Germany funds one quarter of the EU's 85-billion-ecu annual budget. In the run-up to the September elections, German politicians are claiming that the country receives so little in return for this outlay that it pays 58&percent; of the total net contribution to the budget.

This is the first time such a threat has been made to the EU's spending powers since the British Treasury drafted a bill in the early Eighties to withhold payments unless the UK received an annual budget rebate. By 1984, London had won a deal to reduce its payments by 3 billion ecu.

The Germans, together with the Dutch, Swedish and Austrian governments are campaigning for the creation of a general rebate system, modelled on the British scheme, to repay them for their 'excessive' contributions.

The Dutch government, which pays a net 2 billion ecu to the EU, says it too is prepared to fight for a budget reduction. But instead of withholding cash, The Hague is preparing to withhold its support for a new system to provide funding to the Union's poorer regions.

“When a new directive on structural funds is needed, they will need us then,” said Dutch Finance Minister Gerrit Zalm. “We won't agree to it until we have a good agreement on the financial perspectives.”

In Cardiff, government leaders made less progress on the Agenda 2000 package of reforms than had seemed likely even on the first day of the summit.

The wording of the conclusions drafted by the British presidency was toned down in several key areas. In particular, member states could only “note” the working assumption of the European Commission that spending would be capped at 1.27&percent; of gross domestic product since southern premiers could not even agree to this.

The pre-summit wording declaring that the outlines of an agreement should be settled in Vienna in December was changed so that only “substantial progress” on the “key elements” of the package was required.