Forget Cyprus, the EU is About to Go Broke

(March 28, 2013) — The European Union (EU) is about to default on billions of euros of bills that should have been paid last year, a statement from its Budgets Committee has revealed.

The EU faces €16.2 billion in outstanding bills that were rolled over from 2012 due to insufficient funds. As it stands, there is just €11.2 billion available to pay them now, the Budgets Committee report said, and the region is in a stalemate over its economic future until the deficit is resolved.

“The Commission[‘s] proposal to settle only part of the EU’s €16.2 billion debt rolled over from 2012 threatens the EU with insolvency later in 2013,” said Budgets Committee chair Alain Lamassoure, who is also a French politician.

The European Commission, Parliament, and Council agreed last year to settle all bills that were left over from 2012. However, the amended budget produced this year was €5 billion short, the statement said.

“It is thus confirmed: there is a threat that the EU will run out of funds before the end of 2013,” said Lamassoure.

A spokeswoman for the Budgets Committee told aiCIO that member states would have to be asked for more money to cover the shortfall, and admitted that in the current economic climate, this would not be easy.

She outlined that the bills were run up by general expenses, but also European cohesion projects run by the EU. These include the European Social Fund, which invests in jobs and skills programmes across the 27 member states, and the Erasmus programme, which places students in European countries to gain language and cultural experiences.

“EU member states pledge to carry out these programmes,” she said, “but it is often difficult when it comes to paying for them.”

The EU is about to set out a new budget to last until the end of the decade. For this, the Budgets Committee wants a clean slate, which means paying off these bills. Currently the cash is not there, the committee said and a stalemate has ensued.

“In these times when the EU’s credibility is questioned, to pretend to be deciding on a seven-year budget when we are not even able to pay the current year’s bills will not enhance our trustworthiness,” Lamassoure said.

This is the latest and largest deficit run up by the EU. The first time it rolled over bills was in 2010, the spokeswoman told aiCIO, and last year debts were also carried over.

This year there is a shortfall in the amount pledged to over the bills, and it is causing a serious ruckus in Brussels.   

This month, the European Parliament rejected calls to conclude the next budget until an agreement on how the shortfall should be covered was reached.  

“MEPs insisted that the EU’s debts must be settled before negotiations on the long-term budget could be concluded,” the Budgets Committee said. “Parliament will vote on the proposed amending budget after the Council has stated its position, so the ball is now in the Council’s court.”