E.E.C. Budget crisis

Press, 30 November 1987, Page 16

E.E.C. Budget crisis

The European Economic Community has had many budget crises and resolved them. Therefore, it is hard to treat the latest row as anything more than part of a repeating pattern. But the crisis is more than that. The E.E.C. has already used up most of the accounting tricks at its disposal to enable it to stagger from one year to the next; soon the E.E.C. will be without money to pay its bills. A deadline for a budget package was set for October. The deadline was not met. The Community’s farm Ministers last week gave up attempts to find a way to reduce farm spending. The Community’s Foreign Ministers will make another attempt to cut spending before a summit meeting of Community leaders this week but little hope is held for success. If the summit meeting is unsuccessful the E.E.C. will automatically move to a; system of financing month by month, at the previous year’s spending levels. Eventually even that will leave the E.E.C. bankrupt.

Farm spending is at the core of the problem, because at least two-thirds of the Community’s budget goes on farm subsidies. Some reforms of the Common Agricultural Policy have been tried — dairy production, for instance, is now under a system of quotas. However, the E.E.C. farmer may produce as much as he or she likes of some commodities and the E.E.C. is legally required to pay whether a market for the produce exists or not. Most of the members of the Community want a contingency plan; Britain, Spain and Greece do not. Britain wants to be convinced that financial reforms are being implemented. Spain and Greece, which were not in the E.E.C. when the worst excesses of the C.A.P. were devised and do not think of the C.A.P. as being particularly their problem, would like to see more spending on regional and social programmes, which would benefit them. Because farm spending is fixed,

it may be the other E.E.C. programmes that are reduced to solve the budget problem. The size of the problem is impressive. The E.E.C. budget calls for the expenditure of 41 billion ecus (SUSI.2S about 1 ecu), but under the present financing system the Community would be able to raise only 35 billion ecus. The E.E.C. is already 14 billion ecus in debt. Nine of the 12 Community nations want member countries to raise the shortfall from the taxpayer. But Britain, Spain and Greece form a big enough voting bloc not to be overridden. The effect on New Zealand of the impasse is uncertain, although some impact will be felt. If the crisis continues and the possibility of the E.E.C. going bankrupt becomes stronger, it would be hard to avoid a backlash against New Zealand. We sell butter to the E.E.C. but the E.E.C. has enough butter of its own. Such a reaction would be unfair because the E.E.C.’s surpluses are not of New Zealand’s making. New Zealand has another worry. We rely heavily on Britain to protect our trading interests. But if Britain is regarded by other E.E.C. members as being obstructive, Britain will have a harder job to advance the New Zealand case. E.E.C. consumers might rebel against the high cost of food imposed on them. The reaction to a West German radio station satire on the sale of subsidised butter to the Soviet Union is revealing. West Germans pay the equivalent of SUS2.4O a pound for butter; E.E.C. butter was sold to the Soviet Union for the equivalent of 14 cents. When the radio station announced cruises to the Soviet Union, for German housewives to buy the butter at 14 cents the radio station had callers asking when they could go. The radio station has done something to make Germans aware of the costs of the system. But satirists would be hard put to make the policy sound any crazier than it already is.