Forget the MFF, it’s trade not budget aid that matters

EU leaders started their first summit of 2013 in fine fashion. First talks set to begin at a civilised 4pm were delayed until 8.30pm – a cruel interruption into carefully laid dinner plans. Then there was no formal proposal tabled by Herman van Rompuy until 6am. Several hours later on Friday morning it was back for the second round of punishment. The deal – when it came – concluded 24 hours of talks. An impressive display of sustained ‘jaw-jaw’ even by the EU’s high standards.

After the succession of crisis summits that have blighted many a Thursday night and early Friday morning over the past couple of years, I suppose we should be grateful that the politicos are merely dealing with how the EU’s farm subsidies and structural funds are going to be divvied up for the next few years rather than yet another bail-out.

But, ultimately, it’s hard to avoid a sense of frustration. €959 billion sounds like a lot of money but that’s not what is being haggled over. Politicians left the Justius Lipsus building in November with a proposal of €973.5bn in commitments from Herman van Rompuy. With Germany and the UK leading a group wanting further cuts, but the “Friends of Cohesion” and “Friends of the CAP” both anxious to protect their slice of the pie, the amount of room for manoeuvre was limited. In the end, it came down to splitting budgetary hairs. For example, Dutch Prime Minister Mark Rutte held up agreement for hours until he got an extra €45 million to go home with.

It is also far from clear whether or not the painfully reached compromise will be chewed and spat out by MEPs. The European Parliament is preparing to play hard-ball because it says that having payments worth around €910bn based on commitments for €960bn is a recipe for debt and deficit. Last night, Martin Schultz told reporters that the Commission would be forced to table an emergency budget in the coming months to cover a €16bn hole in this year’s budget. Without guarantees that the EU will have the cash to pay for its bills, he wouldn’t sign.

All this after a senior EU official told me that basically what’s at stake is 0.002% of EU GDP. Hardly worth staying up all night for.

Conversely, a handful of bland paragraphs in the post-summit communique could be rather more significant. EU leaders gave a green light for talks on a free trade agreement with the US, a deal that could generate 2% of GDP on its own. While the budget talks were uppermost in most people’s minds, it is the prospect of trade accords with Japan and the US – as well as the soon-to-be-finalised trade deal with Canada – that has the Brussels diplomatic corps excited. EU officials think that an EU/US agreement could translate into €275bn per year and 2 million new jobs.

In fact, taken in this light the budget talks are a microcosm of what the EU used to be and what it could and should be. A seemingly never-ending inward-looking debate about subsidies and investments in Europe by Europe. Ironically, the sections of the budget spending outside the EU- development aid and cash for the countries negotiating accession deals to join the EU – were among the items targeted by the biggest cuts. Meanwhile, outside the Brussels-bubble, the world goes on.