Penny pinching

EU rebate fudge will be a squandered opportunity

There will be drama. Slammed doors, statements of outrage, theatrical threats and a whole lot of grand-standing. The European Union’s Christmas budget pantomime due to unfold over the next three days will see everyone playing according to type. Angela Merkel will plead for austerity, François Hollande will defend agricultural subsidies, and David Cameron will rail against “eurocrats” and staunchly defend the UK rebate. The summit probably won’t reach a compromise this time around, if only because unanimity is needed on the EU’s next seven-year budget framework, and too many issues remain contentious. The leaders will agree to keep working on a compromise for later. And they will miss a chance to review seriously what the EU should spend its money on in a time of crisis, and what solidarity means in such a context.

The weeks leading up to the summit were focused on the risk of a UK veto. But first there needs to be a deal before there can be a veto, and this is still far from the case. The UK’s insistence on seeing spending frozen in real terms could almost be accommodated, which would allow Cameron to return home and claim with some credibility that he was listened to. But cuts to the euro 1,025 billion budget proposal put forward by the European Commission for 2014-2020 have to be carefully targeted to avoid vetoes from other countries.

Then there’s the question of the UK rebate. It was agreed almost 30 years ago when Britain was relatively poor. Since then, other countries like Germany have obtained their own versions - that pay only a fraction of the annual euro 3.6 billion cheque that goes to London each year. But the UK is now only the fourth-largest net contributor to the EU budget - behind Germany, France and Italy. The latter two, which do not receive a rebate, end up paying a higher portion of the UK payment than others.

Does it make sense, within the current EU, to have Italy finance the UK? And more fundamentally, considering the needs of eastern Europe, what’s the meaning of solidarity if everyone insists on getting some money back? In the heat of the moment, this is, unfortunately, the debate that won’t happen.