Talks collapse

EU budget negotiations for 2013 have collapsed. Members of the European Parliament refused to attend talks with EU finance ministers on Tuesday (13.11.2012) since, as parliamentary president Martin Schulz said in a statement, "there is no agreement among the member states about a supplementary budget for the current year." The supplementary budget would amount to around nine billion euros.

In another statement, Alain Lamassoure, chairman of the parliament's budget committee, said, "Given the current impossibility in which [members states] find themselves to solve the problem of the 2012 outstanding balance, the European Parliament cannot continue the budgetary negotiation on the 2012 budget."

Areas such as research, rural development, humanitarian aid and the Erasmus study program, he said, "have been short of money for more than a month."

But there's also no agreement on the 2013 budget. Both the Commission and the Parliament want 138 billion euros, which is around 5 billion more than the governments are prepared to pay. An earlier round of negotiations last Friday also collapsed.

Not just the annual budget

Now the Commission has to make a new proposal and the negotiations can start again. If there's still no agreement, emergency procedures will be put in place under which the EU will be able to spend one twelfth of this year's budget each month. That means the budget would neither increase nor decrease.

But this is about more than the budget: next week, the EU intends to hold a special summit at which the national leaders will discuss long-term financial planning for the years 2014 to 2020. The Commission and the Parliament want significantly more money for this period too.

It's above all the countries like Germany that are net contributors to the EU budget that want to limit spending. Britain wants particular tough savings to be made and is threatening a veto. Although the parties emphasized on Tuesday that their talks about the 2013 budget had nothing to do with long-term spending plans, their collapse will certainly cast a shadow on the summit meeting.

'Bank regulation must bring added efficiency'

The finance ministers also argued about the plans for European bank regulation. This is supposed to ensure that all banks in the EU are regulated under the same criteria. And the heads of government have said that European regulation is a condition for providing funds from the ESM rescue fund directly to banks. That is something on which Spain is particularly keen, since its banks urgently require money, but the state wants to avoid the conditions that would apply if it had to apply for the money itself.

Spainis one of the countries pushing for speedy action, but the Luxembourg finance minister, Luc Frieden, says he wants "European bank regulation to bring added efficiency." Quality, he added, was more important than speed. With that, he put himself in the camp of the German chancellor, Angela Merkel, and her finance minister, Wolfgang Schäuble, who have used virtually the same words.

Plenty of conflict left

But there are further problems, such as the need to separate bank regulation from monetary policy at the European Central Bank (ECB), which will carry out both functions. It's also not yet clear how much regulation there should be, or how authority should be divided between European and national regulatory bodies. And there's a further highly controversial issue: the ECB is only responsible for the eurozone, but European banks operate in the entire EU single market.

The Austrian finance minister, Maria Fekter, sees the danger of a "fragmentation between Euroland and the rest of Europe." She wanted to prevent that and ensure "that bank regulation applies to all the member states and the same standards are applied."

One country that is affected is Sweden, which is not in the eurozone. Finance Minister Anders Borg thinks a compromise by the end of the year may be possible "if we are opening doors and not closing them. The crucial issue for a compromise is whether we will have an equitable treaty of all members of the supervisory board."

How far the non-euro countries should be involved is still unclear. And because so many details are still unclear, the deadline of the end of December is looking less and less likely. The EU is currently so bound up in its budget problems that January 1 no longer seems realistic.