The Budgets Committee has completed its first-reading vote on the 2008 draft budget. MEPs wish to reduce the amount allocated in the budget to the Common Foreign and Security Policy and to use the flexibility instrument to fund the EU's external policy. Funding for Galileo and the European Institute of Technology is sharply increased. If the plenary approves these proposals, some hard bargaining with the Council is in store.

In general the Budgets Committee proposes restoring the level of expenditure entered in the preliminary draft budget and making full use of the margins envisaged under the Interinstitutional Agreement for 2007-2013. MEPs want the overall amount of payment appropriations to be higher than in the Commission's preliminary draft budget (0.97%) and the Council's draft budget, while not exceeding 0.99% of the EU's gross national income. The most significant increases would be for Galileo and aid for Palestine and Kosovo.

Galileo: clash looming

The committee wants to increase the commitments proposed by the Council for Galileo (the European satellite navigation system), by €739 million, to reach a total in 2008 of €890 million (400 million in payments). MEPs believe this figure is needed to complete the project on schedule. The committee wants Galileo to be funded wholly by the Community. The project could fail for good unless sufficient funding is provided.

The funding level proposed by the Council in its first reading (€151 million in commitments), is regarded as utterly inadequate by both MEPs and the Commission (which in September put forward a new funding plan). However, since an agreement is needed with the Council, a tough battle lies ahead: a consensus will have to be reached between the institutions if the expenditure ceiling laid down in the 2007-2013 financial perspective is to be exceeded.

EIT to follow model of EU agencies

The same applies to the European Institute of Innovation and Technology (EIT): the Budgets Committee proposes a figure of €2.9 million (in commitments and payments), for the funding of the EIT board and the creation of a new budget line for Knowledge and Innovation Communities (KICs). Like the EU agencies, the EIT's administrative budget would be separate from its operational budget. The EIT's operational budget would be transferred from the "education and culture" heading to "research and innovation".

To fund the EIT and Galileo, MEPs are calling for a review of the multiannual financial framework. However, in case no deal can be reached with Council on this point, MEPs adopted an amendment transferring this amount to the 7th research framework programme, so that the amount earmarked for funding Galileo does not disappear from the budget.

External relations: the EU on the world stage

Parliament has said many times that the funding available for the EU's action outside its borders for the period 2007-2013 is inadequate. The Budgets Committee is proposing to reduce by 20% the funds allocated to the Common Foreign and Security Policy (CFSP) in the budget and to use the €40 million thereby released to finance other objectives in Category 4 ("The EU as a global partner"), which the committee sees as seriously underfunded.

To fund aid to Kosovo and Palestine, MEPs suggest drawing on €87 million via the flexibility instrument. Of this figure, €40 million would be added to funds already envisaged for the missions to Kosovo and Palestine (to be divided equally between these two objectives).

The flexibility instrument could also be used to fund unforeseen expenditure on the CFSP. Ultimately, the CFSP would still be allocated €200 million, as originally planned, since the CFSP's €40 million, which could be found via the flexibility instrument, is exactly the same as the cut of 20% proposed by MEPs. A discussion on the level of funding of Category 4 and other policies would seem to be needed between Parliament and Council, inter alia on these CFSP-related matters.

Agencies: a boost for Frontex

The Budgets Committee does not support the expenditure cuts on the agencies desired by the Council. MEPs believe the agencies have fully justified their budget needs, as demanded by the EP.

The one exception is Frontex, the agency for the EU's external frontiers, whose budget has virtually doubled, with €30 million extra for operational costs. The figure earmarked for this agency thus rises to €70 million in total. This decision is in line with Parliament's political priorities in the area of "freedom, security and justice" but MEPs remain critical of the results achieved by Frontex and the committee is therefore calling for 30% of its administrative costs to be placed in reserve. This funding would only be released if the head of the agency can provide Parliament with an explanation of the agency's known failures and above all a plan to improve its operational effectiveness.

Lastly, MEPs reversed the latest round of cuts made by the Council to the "Lisbon" headings (competitiveness, growth, employment - heading 1a), and in most cases restored the funding for cohesion (heading 1b) proposed by the Commission in its preliminary draft budget.