The European Union’s finances for next year are in limbo, after the 28 member states and the European Parliament failed to reach an agreement on the Union’s budget for 2015. Humanitarian and development nongovernmental organizations worry that funding for programs in the field may grind to a halt if no solution is found in the coming weeks.
At midnight Monday, a deadline passed without agreement between EU governments — represented by the European Council — and the parliament on a budget for next year. Where the European Commission — the EU’s executive arm — had proposed a 142 billion euro ($178.1 billion) budget, the EU-28 wanted to cut it down to 140 billion euros, while the parliament aimed to raise it to 146 billion euros to include a higher budget for humanitarian aid and other expenditures.
“During challenging times for Europe, negotiations on the EU budget have proven difficult to close,” Kristalina Georgieva, the Commission’s vice president for the budget, said in a terse statement. “A lot of progress had been made, but there are still some issues to resolve.”
On behalf of the Council, Enrico Zanetti, Italy’s state secretary for economic affairs — whose government presently holds the rotating EU presidency — admitted that while they failed to reach an agreement by the deadline, “conciliation talks with parliament allowed us to narrow down the gap between our positions.”
But parliament has been more scathing in its remarks on what it sees as member states’ refusal to budge.
“The situation is so critical that it cannot be business as usual. The EU’s credibility is on the line, both within and beyond its borders,” Eider Gardiazábal, Spanish socialist member of the European Parliament, complained.
Up to 28 billion euros in arrears
The 2015 budget talks were compounded by the need to cover additional expenses under the 2014 budget, which has been snowballing with unpaid bills over the years. These arrears could add up to 28 billion euros by the end of this year.
For 2014, the Commission had suggested an amending budget of 4.7 billion euros to alleviate the backlog of bills, but member states want to halve this amount — much to the ire of parliament.
“We must have a concrete response to the unbearable problem of unpaid invoices accumulating on the desks of the Commission,” said French liberal MEP Jean Arthuis, who heads the parliamentary delegation in the talks.
The Commission announced Tuesday that it will present a new draft 2015 budget “within days.”
After that, a new round of negotiations between Council and Parliament will be launched.
If there is no deal by Jan. 1, the EU will have to finance itself with monthly installments amounting to one-twelfth of the 2014 budget.
The Commission expects that the parties will be able to find a compromise before the end of the year. But the NGO community worries that the budget crisis may jeopardize operations in the field.
“This is not the outcome that we had hoped for,” said Jacqui Hale, head of advocacy at Save the Children’s EU office. “Our partners on the ground need reliable funding in order to deliver. They must be sure that contracts with the EU are signed and honored.”
‘Catastrophic’ implications for aid community
The mismatch between the EU’s commitments and actual payments is especially acute for the aid sector, where the swift translation of financial support into action is critical. Already, the EU’s humanitarian department — known as ECHO — was hit hard by this problem as it started 2014 with a 500 million euro shortfall. It managed to cover this gap through transfers of Commission funds and an amendment to the EU budget, but disbursements still risk being stretched.
“If we don’t have the money, people die,” Georgieva — then in her capacity as European Commissioner for humanitarian aid and civil protection — put it bluntly at a session of the parliament’s development committee in September. “Member states must realize that sound financing is not only morally proper but that it is in their own interest to bring down the flames.”
Another dangerous consequence of the dispute over EU finances is that, without a budget in 2015, several EU flexible funding mechanisms would no longer be able to function. One of these is the Emergency Aid Reserve, designed to help in the case of sudden calamities outside the EU. Without a functioning year’s budget, the 221 million euros in this reserve cannot be mobilized.
Especially riling for NGOs is the EU-28’s plans for drastic cuts of up to 19 percent in the expenses for external actions — including aid — even though these only account for 6 percent of the total EU budget. Funding for agriculture — which traditionally takes up the biggest chunk of EU expenses — and for “cohesion funds” for poorer member states and regions within the Union have been better preserved.
“Apparently, they have a strong lobby to support their funds,” said Tamira Gunzburg, who heads ONE’s EU office. “Programs to protect the poor don’t enjoy this kind of support. But the Ebola epidemic and the crisis of health systems in the region show that aid cuts have consequences, even for the EU citizen.”
The NGO community worries the EU budget dispute threatens long-term predictability of humanitarian and development support.
“Planning and the reliability of aid flows are incredibly important for receiving countries,” Gunzburg stressed. “The EU is giving the best example by working with seven-year budget cycles, with the present one running from 2014 to 2020.”
Gunzberg is fearful of what could happen if no solution is reached by Jan. 1 and the multiannual budget cycles would have up to be “chopped up” in yearly — or worse monthly — installments.
“It would be catastrophic if partners and countries don’t know if there is any money for the coming month,” she warned.
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