European Union negotiators agreed to an increase of 2 percent in the bloc’s budget for 2012 a174.000 million, after more than 15 hours of discussions that ended in the early hours of Saturday.
The agreement was seen as a victory for governments lacking funds through the debt crisis of Europe, which had opposed the demands of EU lawmakers for an increase of more than 5 percent in the budget.
But some officials said the fund to limit the increase to the expected inflation next year could leave the block unable to pay their bills and threaten its credit rating of triple A.
“This is clearly an austerity budget, since most of the Member States are in the midst of a severe financial crisis,” said Commissioner of the European Union Budget, Janusz Lewandowski, who initially proposed a 5 percent increase in expenditures for 2012.
“Now there is a serious risk that the European Commission to run out of money during the next year and therefore can not meet all financial obligations to the beneficiaries of EU funds,” he said.
This could occur because although it was agreed to limit contributions to a budget of 129,000 million euros next year, the government yielded to the demands of the European Parliament to allow spending commitments on the block that rise to the 147,000 million euros.
“The commitments of today become tomorrow’s payments, so that in fact they are playing a dangerous game,” said an EU official.
Expenditure based on “real terms”
But Britain, which had made an intensive campaign to rein in spending in the EU, welcomed the agreement on Saturday, and Financial Services Minister Mark Hoban said the austerity of the union level is vital when states members struggle to tighten their belts.
“This is an excellent deal for Britain. We have stopped the momentum of inflation proposed by the Commission and European Parliament have met the Government’s promise to freeze the EU budget in real terms,” he said.
“Throughout this process, we argued that Member States facing tough decisions on spending at home, could not afford these unrealistic demands,” he added.
Parliament won some concessions in the negotiations, as an extra supply of 100 million euros in aid to the Palestinian territories in 2012.
More than two thirds of the EU budget are aimed at farmers and subsidies for regional aid funds, which finance road construction, environmental cleanup projects and other activities.
Negotiations on the 2012 expenditure of the European Union are seen as a prelude to much tougher debates on the budget for long-term block for the period 2014-2020.
(1 dollar = 0.74 euros)