Accounting "trick" may help clinch EU budget deal

BRUSSELS/ROME Wed Feb 6, 2013 9:03pm IST

BRUSSELS/ROME (Reuters) - A difference in how European Union member states interpret figures looks set to provide negotiators with just enough wriggle room to strike a deal on the EU's next long-term budget at a summit on Thursday.

Proposals from European Council President Herman Van Rompuy, who will chair negotiations over the 2014-2020 spending plan, hinge on the fact that the budget is always expressed in two figures - payments and commitments.

Commitments are legal pledges to fund future projects or programmes, while payments are forecasts of actual spending. Because pledges do not always result in demands for cash, payments are always lower.

The difference, which some officials refer to as "creative accounting", should be sufficient to get a deal since many countries that are net contributors, including Britain, Germany and the Netherlands, base their calculations on payments, while net recipients prefer commitments.

By proposing deeper cuts to payments, Van Rompuy hopes to win the support of Britain for a deal without alienating poorer southern and eastern European countries that want to maximize the amount of commitments that may come their way.

On Wednesday, Italy's EU affairs minister said he expected Van Rompuy to propose a further 15-20 billion euros cut in commitments, on top of the roughly 80 billion euros already trimmed from the original proposal from the European Commission.

That would bring the overall figure for commitments down to between 952-957 billion euros, or roughly 1 percent of the EU's annual economic output.

But at the same time Van Rompuy will suggest much deeper cuts to the limit on payments, minister Enzo Moavero said.

"On the basis of preliminary information, we believe that ... the cuts in terms of payments would be of 30-40 billion euros," he said in a speech to the Italian parliament.

That would bring the overall level of payments down to between 902-912 billion euros, from an estimated level of 942 billion euros in the last compromise circulated at the November summit, EU officials indicated.

Van Rompuy will present his latest compromise to EU leaders at the start of the summit at 1400 GMT on Thursday, officials said.

Sources close to the budget talks said British Prime Minister David Cameron would prefer to see the level of payments cut to below 900 billion euros, but that German Chancellor Angela Merkel is happy with a figure just above 900 billion.

While the EU budget is small compared to total public expenditure in Europe - which is nearly 50 percent of total output - the issue is highly symbolic, and often sees countries fighting to defend areas of spending where they benefit most.

If no deal is reached at this week's summit, EU officials said an agreement is unlikely before European Parliament elections scheduled for June 2014.

That would force the EU into a system of provisional annual budgets from next year, and lead to a hiatus in long-term funding programmes in areas such as research and infrastructure spending.

(Reporting by Luke Baker and Charlie Dunmore in Brussels, and Giselda Vagnoni in Rome; editing by Luke Baker)

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