EU Austerity Budget – Cuts, Cuts, Cuts

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Paul Murphy MEP and Kevin Henry of the Socialist Party dissect the EU Budget 2014-2020

The Irish government has made much of the fact that it now holds the EU Presidency, chairing meetings of the European Council. It has been proudly proclaiming success in negotiating a new EU budget for 2014 to 2020 (the so-called Multiannual Financial Framework – MFF). What they don’t say, however, that in the position of Presidency, they are pursuing the same austerity policies that they implement in Ireland – imposing unprecedented levels of cuts to the EU budget.

Two weeks ago the European Parliament voted for a resolution that rejected, in its current form, the proposed MFF. The proposal comes from the February summit of the EU Council and was a product of horse trading and negotiations between the EU’s 27 heads of state.

This Summit was presented as showdown between Hollande on the one hand and Merkel and Cameron on the other. In reality, it was a discussion on how far to stick the knife into workers and poor people, with Herman Van Rompuy, backed up by the Irish Presidency, presenting a draft proposal for a second round of cuts. This was then amended to reflect the various political pressures on the heads of states. Despite these competing pressures, all heads of states feared an open conflict over the EU budget that would rattle the markets at a time they seemed to be calming. They also no doubt feared such open division could give confidence to workers and those opposed to austerity that they face a divided enemy and give impetus to new struggles.

The Council however, was not a meeting of equals and those who wanted more cuts won out. Countries’ rebates (repayment of funds) were largely protected and Denmark was granted a rebate for the first time. This resulted in a proposed budget with a figure of €960 billion, which amounts to 3% of cuts and this was just the upper limit of financial commitments, the summit also agreed only €908 billion in actual payment obligations.

Socialist Approach to EU cuts

The cuts to the overall budget however only tell part of the story. The nature of the programmes proposed also have to be examined. This can only be done in a limited way at present as the details of the various headings still have to be broken down by the Commission. In doing so, the approach of socialists is a million miles removed from those representatives of big business who have attacked the “backward looking nature of the budget” – code for saying cuts should be placed elsewhere.

Likewise our approach is at odds with who those who oppose the cuts in the budget because it weakens the EU project or the “EU’s political priorities.” Our approach is to fight to defend those aspects of the budget which are of genuine assistance to working class people while opposing hand-outs to big business and funding for anti-social projects such as the armaments industry and the militarisation of Europe’s borders.

Globalisation Adjustment Fund

The five main headings in the Budget cover a broad range of issues and the various programmes still have to broken down by the Commission. The funding for those larger programs outside the main framework of the budget demonstrates what these cuts will mean. For example, the European Solidarity Fund which is used to provide assistance to EU member states when large-scale disasters occur has been cut by 50%.

The cuts to the Globalisation Adjustment Fund are also illustrative of the anti-worker nature of this budget. This fund, which offers extremely limited and delayed support to workers and communities including Dell and Talktalk workers in Ireland who suffer mass layoffs, will be cut by 70%. This programme has faced sustained attack in the course of the crisis with the rules making it harder for this fund to be accessed. Now they are using the discussion on the new budget framework to brutally cut it.

“A toolkit to help growth and jobs?”

It has been repeated that this is a budget for “growth and jobs.” Eammon Gilmore for example has stated that this budget is a “major part of the EU’s toolkit to help growth and jobs.” They point to the increased funding of €34.1 billion to the heading “Competiveness for Growth and Jobs” as justification for this optimism. However, compared to the Commission proposal there is a massive reduction in funding to the tune of €38.7 billion, reflecting the pressure from some member states not to cut other headings as brutally.

Infrastructural projects have received much less funding than expected. The Connecting Europe Facility which  is tasked with developing transport, energy and the digital sector has been cut from €73 billion to €29 billion. Particularly hit is the funding for transport and the development of broadband which on the Council proposal will receive one billion euros compared to the Commission proposal for €9.2 billion.

Other capital intensive projects have also been brought into this heading rather than being funded separately. Socialists have concerns about the nature of some of these projects and we argue for a ban on such projects being used for military purposes. Their inclusion in this heading also serves to artificially boost the figures as the total funding left over for other projects is €92 billion, with an upper limit set at €125 billion .

This includes Horizon 2020 – funding for research, hailed by the Irish Presidency as important for growth. But it is now only expected to receive €71 billion compared to the €80 billion asked for by the Commission and €100 billion asked for by the Parliament. It will also include part of the funding for ‘Erasmus for all’, which is expected to be at the same level as its predecessor or have a certain increase.

However, in previous years, even that amount not been enough to maintain these programmes throughout the year. In 2011 and 2012, for example, extra money had to come from other projects to cover costs.  They also merged several Erasmus and training programs together to form the new ‘Erasmus for All’ which will face increased pressure to maintain the various aspects of training that have been provided in the past.

Cohesion funds: From Carrot to Stick!

The argument that this is a growth budget is particular undermined by the cuts to  Cohesion Funds, which will see a decrease of €30 billion when compared to the previous MFF. This is simply a cut in funding to poorer parts of the EU. Some have argued that the cuts to cohesion funds should be allocated on the basis of richer countries not receiving anything for their poorer regions. Some, including the British Tories, have called for cuts to cohesion funding to be applied to the ‘richer’ countries; in reality this would mean that poorer areas in countries such as Spain, Italy or Ireland would not be able to access these funds.

In this heading is also included the proposal for funding to tackle youth unemployment, whereby countries with a youth unemployment rate above 25% will receive a portion of the €6 billion set aside from cohesion funds and the  European Social Fund. In reality this is a PR exercise. The main role of the European Social Fund is to tackle unemployment and the main role of Cohesion Funds is to tackle inequality within the European Union. The amount itself is relatively small compared to the €21 billion advocated as necessary by the Independent Labour Organisation.

All the heads of states in the Council have done is allocated money that is meant to deal with unemployment to specifically  with youth unemployment. There is no new money involved! Worse still, there is a risk this could be used to push so-called ‘activation programmes’ like JobBridge in Ireland which provide a cheap source of labour for big companies and do nothing to create real jobs.

Other items in this heading includes funding for the PEACE 4 programme and money allocated to Northern Ireland for the community sector. Despite the recent sectarian tensions, this money has been cut by €75 million and is now down to €150 million for the seven year period.

Macroeconomic Conditionality

These funds, with the exception of those to tackle youth unemployment are now tied to ‘Macroeconomic Conditionality’. This is yet another extension of the authoritarian neo-liberal approach that increasingly characterises the approach of the European Commission in particular. Now, cohesion funds will be used as yet another weapon to try to push austerity and right-wing economic policies across Europe.

With ‘conditionality’, the EU Commission will have the power to intervene to stop funds for project if the feel the government isn’t meeting certain criteria including being in “excessive deficit”. This can be only overturned by the European Council voting against this recommendation with a qualified majority, i.e. needing the opposition of the larger countries. The purpose is clearly to further institutionalise neo-liberal policies across the EU as a whole, particularly for those countries who aren’t affected by other measures such as the Fiscal Treaty.

“A green budget?”

The main bulk of the budget cuts are from the Common Agricultural Policy. Here there is a proposed €37.8bn in cuts, that will mean by 2020, CAP will amount to 27% of the EU budget compared to being over 40% at present. This has been hailed by some as demonstrating that the budget is a forward-looking budget.

Socialists of course opposes the massive hand-outs to big agri-business and landlords, for example the Queen of England, who received €0.5 million in CAP payments in 2009. Currently 80% of direct payments go to just 20% of farmers. However, by and large the cuts in CAP will not affect them but will add to the failure of the European institutions and governments to deal with both the environmental crisis and the crisis in rural communities at a time when 34% of farming households in Ireland are now classified as economically vulnerable. We have dealt with the effects of the cuts to CAP elsewhere.

The environmental issues are not limited to the cuts in CAP. The final conclusions document of the summit states that 2O% will be allocated for action on climate change. However, in reality little is really being committed to the fight against climate change except the maintenance of the LIFE+ program, a programme that co-finances environmental projects.

Another issue linked with agriculture is the question of food aid. The amount of food aid distributed to people in Europe has reached levels not been seen since World War II. In Spain alone at least one million people are receiving food aid from the Red Cross. This hasn’t stopped the Council proposing cuts to the European Food Aid Program, a programme launched to support the most deprived people. The €500 million annual budget will be reduced to €300 million from 2014 to 2020 and will affect over 18 million people.

Fortress Europe

The next two main headings in the budget labelled ‘Security and Citizenship” and “Global Europe” both receive increases in funding. From the point of view of the Council, the Commission and the main political forces in the European Parliament they have been given less attention because they are relatively uncontroversial. Socialists however oppose many items funded in these headings.

For example in the “Security and Citizenship” heading, we are opposed to the massive funding that goes into the FRONTEX projects used to co-ordinate the border security across the EU, creating a Fortress Europe. This project has come under scrutiny from a range of NGOs as it has violated basic rights of refugees and asylum seekers.  In terms of Global Europe, while we support the elements that are connected with genuine development aid, we oppose those aspects which push for EU enlargement and commit the “European Neighbourhood” such as North Africa to projects that serve the interest of European big business and not the ordinary people in these countries by pushing the liberalisation of markets.

The final heading is administrative costs for the functioning of the EU institution. For legal reasons, such as commitments to pensions, the EU Council was unable to cut it in the way they wished. However, the increase that was agreed is minimal when one considers the coming enlargement of the EU. Political leaders have tried to portray this as cutting the bloated expenses in the EU – unfortunately not! In reality this is about cutting the wages and salaries of ordinary staff in the EU in the same way they have done in their countries as opposed to cutting the salaries and expenses of MEPs, top civil servants and commissioners.

European Parliament’s Opposition

The leaders of the European Parliament have been extremely vocal in their opposition to the current proposal. This was seen in the large majority for a resolution in the Parliament which was extremely critical and stated that it rejects the budget as it currently stands.

There is nothing new in the idea of the European Parliament being ‘in conflict’ with the Council on budgetary issue. The EU has a long history of it. The very idea of Multiannual Budgets itself emerged from a series of budgetary crises following conflicts between the European Parliament and the Council of Ministers in the 1980s.

While the Parliament and Commission do have a certain interest in larger EU budgets, this is in no way a principled opposition to the cuts. In reality they are opposed to the fact the Council has went beyond its main competence in terms of setting the budget headlines and funding. They are using the opposition in the Parliament as a leverage for negotiations, but it is for very limited ends including demands for a mid term review of the budget and maintenance of the flexibility mechanism (the ability to move funding not spent on one heading to another) rather than opposition to the cuts themselves.

This of course, means that the battle to defend those necessary programmes must be linked with the struggle against austerity imposed by the troika and national governments. It is also means building a political and socialist alternative that can challenge the bosses’ Europe.

Paul Murphy MEP and Kevin Henry

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Paul Murphy is Anti-Austerity Alliance TD and member of Socialist Party. For more see Anti-Austerity Alliance