‘Frugal Four’ EU nations refuse to budge on budget

Major contributors to the European Union’s budget have blocked progress at an emergency summit, insisting they would not stump up more funds for the bloc’s next long-term spending package.

It is worth around one trillion euros (£836 billion).

The “Frugal Four” of Austria, Denmark, the Netherlands and Sweden believe the EU’s 2021-2027 budget, which is meant to fund ambitious climate change and digital economy policies, should amount to 1% of the 27-nation trading bloc’s gross national income (GNI).

EU Council president Charles Michel, who met with EU leaders throughout the night trying to broker a compromise, has tabled a draft budget of 1.074% of GNI.

The European Parliament wants an ambitious 1.3%, while the EU’s powerful executive arm, the European Commission, prefers 1.11%.

“I can understand that when you’re a prime minister in a country that has poor regions, infrastructures, I can understand that … but when it comes to the percentage, I stand firm,” Danish Prime Minister Mette Frederiksen told reporters in Brussels.

Asked whether the standoff can be resolved, Ms Frederiksen said: “No, I don’t think so. I’m willing to stay, and I’m prepared to stay the whole weekend. But no, I don’t think we’re going to reach an agreement.”

She said that another summit would be required, probably in early March.

As he left European Union headquarters in the early hours of Friday morning, Dutch Prime Minister Mark Rutte told reporters: “I’m going to bed.”

Mr Rutte departed with a biography of Chopin tucked under his arm – a prop to suggest that he would probably be reading rather than talking about softening his position.

Broadly speaking, the Frugal Four with the backing of Germany are lined up against the “Friends of Cohesion”, a group of mainly central and eastern European nations who want to see the continued flow of “cohesion funds” – money earmarked to help develop poorer regions.

After a night of bilateral talks with Mr Michel and in small groups, the leaders were set to all meet together again mid-morning on Friday.

But like much about this marathon money summit, nothing can be set in stone, and that timing appeared likely to slip.

What is really at stake is whether the leaders are ready to put their money where their mouths are when it comes to European policy ambitions.

At the same time, they cannot afford to give the impression to their home audiences that they are splashing taxpayers’ cash when economic growth is limited.

With Britain gone from their ranks, the leaders want to prove that Europe can still forge ahead towards brighter horizons, but Brexit has left them with a sizeable budget hole – about 75 billion euros (£62.7 billion) over seven years.

In the greater scheme of things, this is not a huge amount of money for the world’s biggest trading bloc.

Even if a trillion euros sounds like a lot, it actually amounts to about 1% of the gross national income of the 27 nations combined.

<figcaption class='imgFCap'>European Union leaders meeting on Thursday (Riccardo Pareggiani/AP)</figcaption>
European Union leaders meeting on Thursday (Riccardo Pareggiani/AP)

The budget is also made up of customs revenue and income from fines levied by the commission, and the EU’s executive arm has raked in plenty of those from antitrust cases involving tech firms and others in recent years.

So no country even pays 1% of its own GNI, and the debate is over some 0.3 percentage points.

But it is not just about convincing reluctant member countries to stump up funds.

The parliament must also ratify any final budget agreement and for the moment MEPs are far from happy.

“At the moment, we remain 230 billion euros (£192 billion) apart,” European Parliament president David Sassoli said this week.