Tight budget controls as enlargement looms

Date: 23/01/1997

By Rory Watson

THE financial impact of enlargement and the strict disciplines of a single currency will be at the centre of the European Commission's budgetary strategy as it shapes its policy priorities in the coming months.

The process will start next Wednesday (29 January) when the Commission will try to match limited budgetary and staffing resources with the main policy programmes on the Union's agenda.

The exercise, introduced last year, will set out the political parameters facing the 1998 EU budget before a detailed presentation of the spending plans by Budget Commissioner Erkki Liikanen in April.

It will also provide a clear indication of the Commission's thinking as it looks ahead to the introduction of the euro in 1999 and to negotiations with almost a dozen countries seeking Union membership.

“In April, it should be possible to see how the Commission will implement things up to 1999 and prepare for enlargement. The emphasis is likely to be on budgetary rigour, streamlining internal procedures and ensuring a sufficient financial margin for enlargement,” said one senior official.

The single currency and enlargement are substantially altering the seven-year financial perspective for the Union agreed by EU leaders at their Edinburgh summit in December 1992.

That deal set a series of annual ceilings on Union expenditure and forecast that the budget would grow steadily as a percentage of member states' gross national product from 1.20&percent; in 1993 to 1.27&percent;.

But the assumption that spending would rise gradually failed to take account of the speed with which the countries of central and eastern Europe (CEECs) might become members and of the budgetary pressures now weighing on member states as they try to meet the strict EMU convergence criteria.

There is a growing political consensus that the costs of enlargement must be met within the existing 1.27&percent; maximum ceiling rather than asking member states to raise their contributions to the Union budget even further.

“Keeping sufficiently within that margin will be tough, but not as tough as persuading governments to increase national payments,” said one source.

The pressure has already convinced the Commission of the need to impose spending restrictions. The turning point came this year as it began to implement a 'zero-growth' budget, and this rigorous policy is set to continue as sufficient leeway is built into the Union's balance books to meet the costs of enlargement.

In order to stick to its budgetary strategy, the Commission will continue to focus on a small number of internal and external policy priorities. Within the EU, the emphasis will largely be on funding to help small and medium-sized companies, promote research and development (R&D) and encourage the construction of Trans-European Networks.

The main thrust of the Union's external policies is expected to centre on the efficient implementation of its wide-ranging Phare and Meda programmes for its most immediate neighbours: the CEECs and the Mediterranean basin.

The budgetary priorities will also involve a long hard look at how to implement an effective staff redeployment system within the institution so that officials can be rotated as particular policy areas ebb and flow in importance.

The exercise will lay greater stress on the need to decentralise many day-to-day administrative tasks from the Directorate-General for personnel (DGIX) to individual departments and to cut down on the ever-increasing number of time-consuming meetings between different services.

“We must reduce purely administrative inter-service meetings, although policy discussions between departments will continue to be necessary. If we do not do this, then the institution will just be working for itself,” explained one senior official.