Speech to the European Council on 7 February 2013 by Martin Schulz, President of the European Parliament

Speeches
Brussels -
07-02-2013
Internal Policies and EU Institutions

Ladies and gentlemen,

The New Year has brought some good news: there are increasing signs that an economic upturn is slowly taking shape, the euro crisis has disappeared from the headlines and investor confidence is returning. But it is only when its social consequences – high unemployment, growing poverty and alarming levels of sovereign debt – have been overcome that we will truly be able to say that we have put the financial crisis behind us. Until then we must continue to focus our efforts on fostering economic recovery in Europe.

We have already taken one significant step forward: the threats to the survival of the euro have been banished. The turning point was the display of unflinching political determination to keep the eurozone together. The same sort of political determination, in the form of an unwavering commitment to our shared future, is what is needed if we are to make today's negotiations a success and meet the challenges which still face us.

Ladies and gentlemen,

Given the nature of those challenges, savings made in the EU budget are savings made in the wrong place, because the EU budget is one of the most powerful sources of investment in Europe, a source of investment which people now need more than ever. After all, the EU budget is not money for Brussels; it is money for ordinary people in Europe. A total of 94% of our budget is channelled directly back to the Member States, to the regions and to ordinary people, or is invested in measures to help us achieve our foreign policy priorities.

Let us be clear about this: the proposed reductions in the EU budget – for example in the areas of transport infrastructure, broadband networks, the Erasmus Programme and rural development – are nothing other than real cuts whose impact ordinary people will feel in their daily lives. For example, funding for food banks is to be cut by half, even though they are providing more and more people with their only meal of the day. Making cuts here is at odds with the key value underpinning the European Union – solidarity.

Before you start your discussions about the multiannual financial framework, please allow me to remind you of three premises which are central to the European Parliament's approach to this issue. We began our work on the MFF two years ago in the SURE committee and since then we have consistently made our views very clear. Since the MFF is covered by the consent procedure, I would strongly urge you to take account of both the financial and the more fundamental issues raised by the European Parliament. You all have a wealth of experience in dealing with your national parliaments, so you know only too well that you have to take parliamentarians' views seriously if you want their consent to your proposals.

Our first premise: we want a modern EU budget. As far as we can tell, however, the proposal on the table today would be something very different, namely the most backward-looking financial framework in the history of the EU.

I have every sympathy for President Van Rompuy, given the invidious position he finds himself in. His task is to secure a compromise between States whose first priority is to defend their national interests. The States in question fall into three groups: those for which agricultural policy is the sticking point, those for which cohesion policy is the sticking point, and those for which radical cuts in the EU budget are the sticking point. The Van Rompuy solution is to leave agricultural policy and cohesion policy virtually untouched. In order to reduce the overall volume of the budget and thus placate the third group of States, however, cuts are to be made in European policies which are vital for the future, such as research and education. This is the worst of all worlds, since what is at stake now is not only the size of the budget, but also the type of investments that budget funds. EU policies in the areas of research, education, training, foreign relations and development in particular generate genuine European added value. The European Parliament feels that making savings in these areas is misguided, because these forward-looking policies represent an investment in our ability to innovate in the long term and our competitiveness. They are an investment in a sound future for our children!

We need these European policies, now in particular, in order to create growth and jobs. The British Academy has sent me a letter drawing my attention to the fact that the European research programme FP7 has generated 0.96% in additional GDP and 900 000 jobs and asking for the funding of EUR 100 billion being sought for the research support programme Horizon 2020 to be confirmed. It's quite simple: investing in European research generates added value.

Let me ask you this: how can we hope to defend our interests in any credible way, whether in the sphere of trade policy, in the fight against climate change, or in the context of our neighbourhood policy, if we cut the very resources earmarked for these purposes in the budget? How will it look if we have no money available in our development cooperation budget to lend a hand when countries emerging from crisis try to build a stable democracy? An austerity budget is certainly no way to help the EU achieve its ambitious goals. An ambitious European Union needs an ambitious budget.

In the European Parliament's view, a modern financial framework means developing at long last a form of financial planning which is not based solely on rigid, inflexible budgets. Just like any Member State, the EU needs to be able to respond quickly to changing economic and political circumstances. Let me give you one example: if we keep to our rigid approach we will not be able to respond effectively to unexpected events, such as those currently unfolding in Mali. Once the French military intervention carried out in order to protect the security of every European has been completed, Mali will need help with the process of civilian reconstruction. If we are to meet challenges such as this we need flexible arrangements which can be used to mobilise the resources required. That means allowing for flexibility between expenditure categories and between financial years and introducing a legally binding revision clause, which, like the flexibility arrangements, can be adopted by means of qualified-majority voting. What Europe needs are not compromises which reflect the lowest common denominator, but modern financial planning.

Ladies and gentlemen,

Our second premise: for us, Europe must amount to more than just the lowest common denominator. When the Lisbon Treaty came into force, many fine-sounding statements were issued emphasising that the EU would be more effective now that decision-making by a qualified majority was the norm. What the current MFF debate has revealed only too clearly, however, is that the sum of 27 national interests is being portrayed as constituting European added value, even though achieving compromises on the basis of the unanimity principle is much more difficult, and at the same time much less audacious, than simply holding a vote and letting the majority decide.

What is more, adopting the MFF on the basis of the unanimity principle would mean giving in to the demands made by the British Government in particular concerning payment ceilings. In purely arithmetical terms, payments over the period to 2020 would effectively be frozen at the level of the 2011 budget - we are talking about massive real cuts; as regards commitments, in 2020 the same ceiling would still apply as in 2005. I don't know if this can be described as realistic financial planning. There is also the fundamental question of whether we would be justified in laying down a seven-year financial framework which would bequeath to our successors in the next European Parliament, and indeed in the European Parliament after that, and in the next Commission and in the Commission after that, budgets much lower than the ones available to us. It is not clear whether this is democratically defensible. This approach has nothing to do with planning certainty. What we are actually doing is ignoring a problem which calls for an immediate, flexible response. I would also point out that the financial framework would cover a time span during which at least one Member State has said that it may leave the European Union.

Ladies and gentlemen,

In a series of individual conversations with Heads of Government I have formed a clear picture of your respective positions. When I compare these with the standpoint held by a majority of MEPs, as expressed in the resolution on the MFF, the plenary debate and the open letter sent by the chairs of the PPE, S&D, ALDE and Verts/ALE Groups, it merely confirms me in my view that an MFF as it is currently being proposed, which represents the lowest common denominator acceptable to all 27 Member States, will not secure the approval of the European Parliament. The same political group chairs I referred to a moment ago have also informed me that they have initiated the procedure required to ensure that the vote on the MFF is taken by secret ballot.

I should therefore like to repeat what I said at the November Summit: we, the representatives of the people, are willing to accept savings. But the further you depart from the Commission proposal, the more likely it is that your decision will be rejected in the European Parliament, in particular if payment appropriations fail to match commitments.

If no agreement can be reached on an MFF, the 2013 ceiling will continue to apply, in accordance with Article 312(4) of the Treaty on the Functioning of the European Union. In terms of numbers this would mean, for the next seven years, overall spending of EUR 1026 billion – EUR 19 billion less than under the Commission proposal on the MFF, but EUR 70 billion more than under the current proposals for a reduced budget. The European Parliament would certainly be able to work well with annual budgets which were based on the ceilings for the current financial year and whose adoption would require only a qualified majority, not unanimity. If the political will is there, multiannual planning is possible under these conditions as well – at all events there are no legal grounds for thinking otherwise. We are prepared to adopt legal bases which are valid for seven years, if necessary. The resources required would then have to be made available on the basis of annual financial planning.

Ladies and gentlemen,

Our third premise: we will not allow the EU to run a structural deficit. In recent years the disparity between commitments entered into and the payment appropriations actually available has steadily widened. This state of affairs must be remedied without delay.

The MFF in the form currently being proposed, however, would turn what is already a legally highly questionable trend into a structural deficit, because, right from the start of the period it covers, the payments ceiling would be too low. Commissioner Lewandowski has now put a figure on outstanding commitments, that is to say the accumulated bills for commitments entered into in previous financing periods, which triggered dismayed reactions at yesterday's meeting of the Conference of Presidents: for the period to 2020 we are talking about EUR 250 billion. The Commission proposal for the MFF for the period from 2014 to 2020 includes payments which take account of these sums which are still outstanding. If you now cut the Commission proposal by EUR 100 billion you will be driving Europe into a debt trap. Europe, like the USA a few weeks ago, is heading for a fiscal cliff.

Let me put this in simpler terms: we, the EU Member States and the European Parliament, reach agreement on a set of programmes. These decisions are legally binding. The programmes in question are then implemented as agreed, commitments are entered into and contracts are concluded, for example in order to provide financial support for infrastructure projects in your countries. But then, suddenly, you stop paying the bills which are piling up. This is exactly what happened last autumn.

To illustrate what this meant in practice, please allow me to digress for a moment and talk about the current budget situation. As President of the European Parliament I was forced to acknowledge that in October 2012 the EU was already essentially insolvent. Although the bills for November and December had not yet been submitted, in October the shortfall already amounted to EUR 9 billion. I received a frantic phone call from the Budget Commissioner telling me that the Member States were refusing to pay up. In late October the payment appropriations available for the financial year 2012 had already been exhausted, the EU was effectively bankrupt and a supplementary budget was needed as a matter of urgency. One finance minister, however, was completely unmoved: as he put it, 'we know that we have entered into these commitments, but that doesn't mean that we'll make the payments'.

In a laborious process which did indeed see some Member States refuse for weeks on end to make outstanding payments, two-thirds of the shortfall of EUR 9 billion was scraped together. The remainder was carried over to the financial year 2013, as were the shortfalls for November and December 2012, which had not even been taken into account in the supplementary budget. Accordingly, we effectively began 2013 with a deficit of EUR 16 billion.

This merely continued a trend: from 2010 to 2011 a shortfall of EUR 5.5 billion was carried over in this way, from 2011 to 2012 the figure was already EUR 11 billion and now – in 2013 – we have reached EUR 16 billion. And yet from 2014 onwards you are proposing to lower the payment ceilings even further. This is the beginning of the slippery slope towards a deficit Union. What an absurd state of affairs: at national level we are fighting hard to escape from the debt trap, and at European level we are walking blithely into exactly the same trap.

As President of the European Parliament, whose signature is required for the definitive adoption of the budget, I cannot, will not and, indeed, may not accept what amount to deficit budgets. I am bound by the EU Treaty and deficit budgets constitute a breach of Article 323, which stipulates that the European Parliament, the Council and the Commission 'shall ensure that the financial means are made available to allow the Union to fulfil its legal obligations in respect of third parties'.

It could be objected that people who are overdrawn simply have to cut back on their spending in certain areas. But we can't even do that, because the Union's other commitments are legally binding as well – or should we simply adopt notional programmes, knowing full well that when the time comes we will not be able to fund them?

Ladies and gentlemen,

You know the European Parliament's standpoint on own resources. Let me take this opportunity to state our argument once again: endowing the EU budget with a proper, sensible own-resources system will generate savings in national budgets. Opposition to own resources on ideological grounds is possible, but it has nothing to do with pragmatic politics.

Why? Because savings alone will not be enough to fill the gaps in our budget. To be sure, the EU institutions have the same duty as national authorities to be efficient and thrifty. Simplification, rationalisation and qualitative improvements can generate savings in many areas – and we intend to make those savings. Unfortunately, efficiency gains of this kind will not be enough to end the mismatch between the tasks allotted to us and the inadequate budgetary resources we can draw on to carry them out. More and more tasks and less and less money – the inevitable result is budget deficits. The European Parliament will not go along with this.

Ladies and gentlemen,

Tomorrow you will discuss EU trade policy. In the light of the massive challenges facing the EU, trade policy represents an important means of creating and safeguarding economic growth and jobs in Europe.

With that aim in view, we must develop closer trade relations with our key partners, such as the USA and Latin America. Mexico, a country which has an impressive growth rate and which would benefit just as much as we would from closer trade relations, offers a perfect illustration of what I am talking about. I applaud the commitment to this principle you showed at the EU-Latin America Summit. I regard relations with Latin America as vital for the future of Europe.

Close trading cooperation between the USA and the EU, which is now on the table once again and which could lead to the establishment of a transatlantic free trade zone, would likewise be beneficial to both sides.

As democracies founded on shared values, however, we must never forget that trade is not an end in itself. Our aim must always also be to improve the lives of the people with whom we trade. At the instigation of the European Parliament, the documents which served as the basis for the negotiations on a free trade agreement with Colombia and Peru included, for the first time, a transparent and binding road map on improving compliance with human and workers' rights and environmental standards. This has set a precedent which should be followed in the future. As the world's largest trading bloc, we have the opportunity to bring about positive changes in the lives of people in other parts of the world. We should take that opportunity.

This is only one of many instances of the European Parliament using its new Lisbon powers constructively. You too can draw on those powers by encouraging the specialist councils of ministers to work closely with the European Parliament and involve us in negotiations at an early stage.

A further point on tomorrow's agenda is the Arab Spring. Here again, I would urge you to speed up the negotiations on trade agreements with the States in the Maghreb region, because what these young democracies urgently need are jobs and economic growth. Stable democracies are impossible without social peace - our own history has taught us this. That is why it is so important to ensure that trade agreements of this kind have no adverse social consequences.

Our trade agreements with these countries must be part of a comprehensive Mediterranean strategy. In keeping with that aim, in the Union for the Mediterranean the European Parliament has been calling for closer integration across the entire Mediterranean region in an effort to boost growth and stabilise the young democracies in the countries of the Arab Spring.

Ladies and gentlemen,

Today the European Council will witness a clash of national interests. There is nothing new in that. I don't believe, however, that we should be satisfied with a European Union which consists only of the sum of 27 national interests. Ultimately that may be enough for each one of you, in your role as heads of national governments. But please understand that for many of us in the European Parliament the essence of the European Union is more than just the sum of 27 national interests.

President Hollande was right when he said the following in his speech in the European Parliament on Tuesday: 'c'est notre crédibilité qui se joue, crédibilité non plus financière mais politique. Au-delà des choix budgétaires, c'est une conception de l'Europe qui est en débat'. The overwhelming majority of the Members of the European Parliament share that view and would join me in asking this question: what kind of Europe do we want?

Your decisions will determine whether today's meeting of the European Council comes to be seen as the start of a process, or the end of one.

Thank you for your attention.

For further information:

europarl.president.press@europarl.europa.eu

  • Armin Machmer
    Spokesperson
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