Better an early imperfect deal than failure

The European Council is at risk of making a bad situation worse

The European Council has an opportunity next week to make a bad situation very much worse. The context for negotiations on the European Union’s budget for 2014-20 is hardly propitious. The Council is polarised between wealthier and poorer countries. Member states have been grandstanding and muscle-flexing and bad-mouthing each other as if they were heading to a prize-fight rather than a negotiation between consenting parties.

They have contrived – with some assistance from the European Commission and the European Parliament – to drag into their quarrels the budget for 2013 and changes to the budget for 2012. Talks on the 2013 budget hit the rocks on Tuesday (13 November) and the damage still has to be assessed. All in all, the omens do not look good for the European Council meeting of 22-23 November.

That said, Herman Van Rompuy, the president of the European Council, this week put forward an intelligent proposal as a basis for negotiation. It is more reasonable in both tone and substance than the paper earlier put forward, on the basis of discussions between budget ministers and foreign ministers, by the Cypriot government,.

Van Rompuy, who in an earlier life was Belgium’s budget minister, has an unenviable challenge in trying to bring together the Council’s disparate views (the longer-term budget has to be agreed unanimously). But his approach makes sense. He is proposing deeper cuts from the Commission’s initial proposal than were countenanced by the Cypriot government in its negotiating paper. There would otherwise be no chance of getting the net payers to sign up to a deal. But for the gambit to work, he probably needs the net payers to make concessions on the 2013 budget, and of that there is, as yet, no sign.

The sorry truth is that reason and logic now have little part to play in this budget debate. Government leaders are playing to their domestic audiences and some of them are desperate to come back from next week’s European Council with victory – whatever that might mean – or at least a score draw. It apparently does not matter that the amounts of money being fought over so ferociously are in some cases (such as the 2013 budget) only a few billion – modest sums compared to the amounts being devoted to shoring up the euro, or indeed to the amounts being wiped off the value of European companies because of the fragility of the eurozone.

At this stage, outright agreement seems unlikely. For Van Rompuy, the best he can hope for is probably significant progress towards a deal, in the hope of final agreement early next year. The alternative – complete failure – is one that government leaders should contemplate, because it might concentrate their minds. Federal elections in Germany will not make reaching agreement easier later on in 2013. To live without a budget agreement is not impossible, but would be desperately damaging to an already weak EU. Brinkmanship is an inescapable part of budget negotiations, but the European Council should refrain from throwing itself into the abyss.

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