BUDGET: COUNCIL AND MEPS DIVIDED OVER TSUNAMI FINANCING.

In its draft amending budget for 2005, the European Commission had proposed financing the entire 98 million from the EU's euro 200 million flexibility instrument which is meant to pay for unexpected crises. The Council agreed during the meeting on July 11 to find 15 million from this instrument while both the Council and the EP agreed that a further 50 million could come from the emergency aid instrument. This leaves an additional euro 33 million to be found from somewhere in the budget itself. This will be one of the key issues for EU Finance Ministers to resolve when they meet to negotiate on the 2005 and 2006 budgets in first reading on July 15. Once the Council has agreed the draft budget, it is passed to the European Parliament for its first reading which normally takes place in October (for more information on the approval process for the budget, see below).

On the 2006 budget, the Council agreed last week to cut the Commission's proposed total by 1.1 billion euro to 111.4 billion (for details of the Commission's proposal, see Europe Information 2958). The Council wants to make the main savings (euro 516 million) on research and development (which would be cut by 280 million), information society (down by 132 million) and energy and transport (33.5 million). This proposal to cut expenditure on policies linked to the EU's Lisbon goals of increasing competitiveness and boosting innovation were criticised by MEPs in the July 11 meeting.

The Council has also called for 150 million to be cut from the spending on direct aids for farmers and other market-related expenses (heading 1a). A proposal to transfer euro 655 million from this section to rural development under the modulation provisions has been approved.

On structural programmes (heading 2), the Council wants to make a total cut of 150 million by reducing the structural funds themselves by 72 million and other initiatives by 78 million.

External policies would see a cut of 82.5 million, mainly concerning programmes for countries in the Mediterranean, African and Caribbean and Pacific states, Central Europe and the Asian republics. MEPs have expressed concern at planned reductions in his area, especially as the Council is not proposing cuts in spending for Common Foreign and Security Policy actions.

The Council wants to reduce administrative costs by 120 million, by reducing planned additional posts in the Commission to save 94.4 million and posts in the Council to lower costs by 10...