EU BUDGET: COMMISSION CONFIRMS BID TO RAMP UP EMERGENCY RESERVES.

At the heart of the Commission's approach to the new Inter-institutional Agreement (IIA) is the expansion and addition of budgetary reserves which it hopes will give it potentially more money than the 862 billion agreed in December.

The key elements are an increase in the flexibility instrument to euro 700 million a year (from the current level of 200 million). The Commission wants to make the instrument multi-annual so that unused surpluses can be carried over from one year to the next. The instrument would be outside the budget which, the Commission argues, makes it easier to spend the funds available and could be used for the first time for unforeseen events other than foreign policy emergencies. Until now, the instrument has only been used for post-conflict reconstruction in Kosovo, Afghanistan and Iraq and to help the countries hit by the Indian Ocean tsunami in December 2004.

The Commission is proposing maintaining the funds available for the European Solidarity Fund at euro 1 billion per year but having it outside the budget, again with the aim of making it easier to spend funds by avoiding the lengthy procedural steps associated with the usual budgetary instruments.

The emergency aid reserve would be maintained within the budget at euro 221 million a year.

The proposal also includes the new Globalisation Adjustment Fund (GAF) which would provide euro 500 million a year to help workers affected by factory closures. This would also be within the budget but would be funded from unspent funds from other budget lines.

A letter from Commission President Jose Manuel Barroso to the Council and Parliament also draws attention to a number of problems caused by the budget deal in December. These include:

- By insisting that 75% of spending under heading 1a (competitiveness for growth and employment) goes on research and development, this means that 48-49 billion of the total 72 billion-euro allocation for this heading would be devoted to R&D. This would only leave 23 billion for other policies within this sector such as trans-European networks, education and training, 40% down on the Commission's 2004 proposal.

- The agreement on rural development funding struck in December would see the spending on this policy (now widely seen as a more modern way to support rural communities instead of direct production-linked farm subsidies) fall by 2013 compared to 2006. The Commission believes this fall should be addressed as it would mean farm policy...