Sunday 20 November 2011

Stingy EU 2012 budget: 0.98% of GNI

The Autumn 2011 European Economic Forecast from the Commission offers sobering reading about dashed hopes and danger zone entry, but let me pick just a detail. The predicted inflation rate is 3.0 per cent this year and 2.0 per cent in 2012 (against the background of GDP growth for EU-27 of 1.6 and 0.6 per cent respectively).

As we saw, for the German chancellor Angela Merkel and the UK prime minister David Cameron the inflation rate was the limit of the growth of the budget of the European Union for 2012. Both Germany and Britain are off target with regard to the EU stability and growth pact.

The inflation rate was also the focus of the press release from the Council ahead of the Conciliation Committee with the European Parliament.

Since the early hours of Saturday morning we have the outline of the 2012 budget after conciliation, where the member states and especially the net payers railroaded the more active ambitions of the European Commission and the European Parliament:

3126th Council meeting Economic and Financial Affairs (BUDGET) and Conciliation Committee; Brussels, 18 November 2011 (provisional vision, 17016/11)

The end result in a nutshell focuses on concrete expenditure (actual payments):

The Council and the European Parliament, meeting within the Conciliation Committee, agreed to limit the total amount of payments for the 2012 EU budget to EUR 129.088 billion. This corresponds to 0.98% of the EU's Gross National Income (GNI) and represents an increase of 1.86% compared to the EU budget 2011 as amended by amending budget Nos 1-6. The agreed payments increase remains below the latest Commission inflation forecast of 2% for the EU in 2012, meaning that in real terms the agreement is tantamount to a reduction of the EU budget. The EU herewith rally to the important member states' efforts to consolidate national public finances.

The Commission and the EP had requested more on grounds of fighting the economic crisis by active means:

In its position adopted on 26 October the European Parliament requested an amount of EUR 133.139 billion in payments (+5.23% compared to the budget 2011 as amended by amending budget No 1). The Commission proposed for 2012 an amount of EUR 132.739 billion in payments, leading to an increase of 4.9%.

The Council is expected to formally adopt the 2012 budget on 30 November and the European Parliament to vote on 1 December 2011.

You find details of different budget posts in the conclusions and you can watch the video recording (25:38) of the press conference with Jacek Dominik (Polish presidency), budget commissioner Janusz Lewandowski, Alain Lamassoure (EP) and Francesca Balzani (EP).


Accounting for less than one per cent of total production, hardly the budget of a super state, with total government spending at more than 50 per cent of GDP in the European Union.

Ralf Grahn

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