Lidstaten slijpen messen voor onderhandelingen EU-begroting 2007-2013 (en)

EUOBSERVER / BRUSSELS - EU Finance Ministers will meet near the Hague tomorrow to thrash out a whole host of economic issues, including how the EU should be financed from 2007 onwards.

The occasion marks the first time ministers will officially discuss Commission proposals on the EU budget from 2007-2013 and two main battlegrounds are expected to emerge.

How to proceed?

The first concerns the amount of money member states will transfer to the EU.

Brussels insists that the EU's budget must be expanded and has called for an increase during the period from 133 billion euro in 2007 to 158 billion in 2013.

But six member states (Austria, France, Germany, the Netherlands, Sweden and the UK) who pay more into the EU budget than they receive, have demanded that the budget ceiling be capped to one percent of gross national income.

The budget is divided into various categories of spending, such as agriculture or sustainable development, and the strategy of the Dutch Presidency tomorrow is to attempt to establish the position of member states on each separate category.

"We will discuss ways to start negotiating", said a source close to the talks.

UK to stand firm on rebate

Another potential flashpoint concerns the British rebate from the EU budget.

Gerrit Zalm, Dutch finance minister and current President of the Council of Finance Ministers, said today (9 September) in an interview with the Financial Times that the UK must accept that its 4.6 billion euro yearly rebate from the EU coffers is no longer sustainable.

But UK officials say that London will defend the status quo with vigour, believing that the reasons behind it - mainly that the UK receives less in farm aid than France - remain valid.

Reform proposals

Also high on Ministers' agenda will be the proposed reform of the Stability and Growth Pact - the rules underpinning the euro.

The Commission last week proposed a loosening of the Pact, whilst keeping intact the rule that member states may not run a budget deficit higher than three percent of gross domestic product (GDP).

Objections to the proposed reforms have already been raised, notably by the German Central Bank.

But Mr Zalm - who has long argued for the rules to be applied strictly - will tomorrow attempt, as President of the group, to forge a consensus amongst member states rather than argue his own opinions.

"He will be speaking as President of the Council, not as Dutch Finance Minister", a Dutch official told the EUobserver.

No agreement will be reached on this issue tomorrow as it is expected to spill over into the Luxembourg Presidency, which begins on January.

Mr Euro

One area where agreement may be more likely concerns the appointment of a semi-permanent president of the eurogroup - the informal Council of Finance Ministers from countries that have the euro as their currency.

Proposals have been tabled to end the rotating presidency of this Council and have one person in place for two and a half years.

This person - inevitably dubbed Mr Euro - would give the group a public face and would liaise with the European Central Bank (ECB) and the Commission on economic issues relating to the euro.

It is almost certain that Luxembourg Prime Minister Jean-Claude Juncker - who doubles as his country's Finance Minister - will be appointed to the role, but officials were unable to say whether this appointment will be made tomorrow.

Any other business

During the packed two-day meeting, Ministers will also hear a proposal from the Commission on harmonising the way corporate taxes are calculated across the EU - seen by some as the first step towards tax harmonisation.

They will also hear from former Dutch Prime Minister Wim Kok on the progress of his report on ways to bolster the Lisbon Strategy - the EU's ambitious aim to become the most competitive, knowledge-based economy in the world by 2010.

And they will debate ways to reduce the administrative burden on businesses - a subject very close to the heart of the Dutch Presidency.