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Published On: Fri, Feb 8th, 2013

European leaders agree to cut spending by 3%

Leaders, policy makers and diplomats from across Europe finally exited 24 hour long negotiations this evening after coming to agreement over the seven year budget for the European Union, running from 2014 to 2020. The negotiations came about after British Prime Minister David Cameron insisted that the British public would not accept austerity if the rest of Europe was not also tightening the belt. This eventually lead to Cameron threatening to leave the EU if amendments to the proposed budget were not made.

Originally the suggested budget was €1.03 trillion, that has now been cut to €959.8 billion — however, realistically, only £908.4 billion can possibly be spent. This represents the first ever decline in spending within the European Union, as the budget falls by 3%. While it is expected that portions of the British public will scoff at the results of the negotiations after Cameron had forcefully asked for the budget to be slashed to €886 billion, the real world cuts will actually be much greater due to inflation.

The negotiations were chaired by German chancellor, Angela Merkel. The economic powerhouse of Europe was keen to play a leading role in these negotiations, ultimately brokering the deal. David Cameron spearheaded the campaign for budget cuts, heavily backed by the nations that have all committed to budget cuts as they desperately try to drag themselves out of financial turmoil. Meanwhile Francois Hollande, the French president, lead the argument for those countries who favoured fewer cuts and hoped to adopt a slow and steady approach to the situation.

Ultimately, a middle ground was found. The agreed cuts will give David Cameron enough to return to Britain with his head held high, while Francois Hollande will be satisfied with sufficient budgets in key areas. One such area is the €6 billion that has been allocated to address the current unemployment rate of young adults.

According to Eurostat, the European Commission’s own statistics branch, unemployment in under 25’s at the start of 2012 was 21.4%, more than double that of 25 to 74 year olds which have a 8.3% unemployment rate. It has also been strongly emphasised that €1 billion has been cut from spending in Brussels on Bureaucracy.

Mr Van Rompuy, the president of the European Council, later concluded “It is perhaps nobody’s perfect budget, but there’s a lot in it for everybody”.

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- Gregory previously worked for a leading financial news publication and is now assistant news editor of financialtrading.com.

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