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Tuesday, December 22, 1998 Published at 13:40 GMT

World: Europe

Background: The EU budget row

By Europe analyst Tamsin Smith

The EU budget for 1999 is expected to amount to £61 billion and the European Commission had pledged not to increase the total over the next few years.

However, with enlargement on the horizon, reform is now imminent. The question over who should foot the bill has stirred up massive controversy about individual country contributions and also over corruption and disappearance of funds.

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The issues

  • Mismanagement: The Court of Auditors (the EU's financial conscience and watchdog) has sharply criticised the EU for mismanagement of its multi-million pound budget, errors in payments, lack of transparent accounting, waste and fraud in many cases ranging from the nuclear strategy programme, to mishandling of the £70m Humanitarian Aid budget.

  • British rebate: The European Commission now says that the budgetary imbalance of the UK is no longer unique and that the £2.8bn British rebate agreed by Margaret Thatcher in 1984 distorts the whole system of contributions. Germany in particular has been adamant that it wants its net contribution of £7.85bn reduced.

  • Rich against poor: The floodgates are opening for a debate that will pit the rich countries against the poor, and the big farm producers against the smaller ones. The door has been opened too for radical reforms, above all in the area of farm spending.

  • Eastern Europe: By April 1999, the EU must have reached a decision about how and whether to change the rules governing who pays for what for the period 2000 to 2006, during which Eastern European countries may well be allowed into the European Union club.

  • Budget freeze: A campaign is gathering momentum amongst European Union countries for a budget freeze in order to scupper the European Commission's plans for a big increase in the EU budget in the years 2000 to 2006.

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