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Tuesday, October 28, 2014

UK's Cameron Makes Case to Attack EU - Brussels warns David Cameron over €2.1bn bill payment



David Cameron will “open a Pandora’s box” over Britain’s EU budget rebate and will be hit with automatic fines if he refuses to pay the UK’s €2.1bn outstanding bill on time, Brussels’ most senior budget official has warned. 

The hard line from Jacek Dominik, the departing EU budget commissioner, reflects disbelief in Brussels over the British prime minister turning a “technical adjustment” – accepted without question by British officials – into a political crisis.

Senior EU officials see few options to help Mr Cameron save face over the charge, which is due on December 1 and automatically triggers a fine if not paid on time. Over a year, the penalty alone would run to hundreds of millions of euros, with the interest rate starting at a minimum of 2 per cent and increasing every month by 0.25 per cent. 

Mr Dominik said the commission was simply mechanically applying rules on EU contributions to statistics on national wealth provided and approved by UK authorities. He said British officials were “fully aware” of the final charge and did not raise issues with it at two meetings over the past fortnight. 

At an earlier meeting of finance ministers on October 14, Mr Dominik even warned David Gauke, financial secretary to the Treasury, that the UK would soon need to make a significant top-up of unspecified size. No objections or questions were raised by Mr Gauke, according to officials. 

Any attempt to change those rules would require a new law, a potentially laborious process that requires approval of a weighted majority of member states as well as the European parliament – long Britain’s enemy on budget matters. 

Mr Dominik warned that revising contributions rules would also throw into doubt the application of the UK’s budget rebate secured by Margaret Thatcher, former prime minister. “If you would like to have a full picture of the EU situation vis á vis budget, you would have to take into account several of the adjustments,” said Mr Dominik.

He added: “If you open this for future negotiations, you open a Pandora’s box.”

EU officials say the extraordinarily big bill comes from UK statisticians bringing the treatment of six sectors – including charities and the black economy – into line with EU norms. The eventual agreement in May led to Britain’s bill for systematically underpaying since 2002. 

Mr Dominik added that he was “surprised” by Mr Cameron’s angry reaction as “there was no single signal from the UK administration that they had problems with this figure”. 

Overall, the commission will not receive any extra funds. Indeed, alongside the top-up bill is a separate piece of legislation – the so-called draft amending budget number 6 – which returns some excess funds from the annual EU budget to member states. 

If he is able to build a blocking minority with other countries unhappy with the top-up bill – such as Italy and the Netherlands – Mr Cameron could stop this legislation being passed. 

But it would have the effect of increasing Britain’s actual bill in the short term to €3.6bn, which is the gross amount required without the inclusion of adjustments and rebates worth €1.4bn, which is included in the amending budget.

The commission argues that it has no leeway on the application of the rules, which are clearly laid out in law and do not even give them the flexibility to stagger the top-up payments. 

British officials could challenge the commission regarding its calculation, specifically on whether all years to 2002 should be included, and whether the enlargement of the EU since then is properly taken into account. However, these points are likely to make a marginal difference to the final sum.

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