“The rich countries have had their way”, comments the Warsaw daily and names them all: the UK, the Netherlands, Sweden, Austria, Denmark and Finland. These member states had long fought for the EU budget to be frozen in real terms, arguing that the Commission was in no position to raise spending when everyone around was making cuts. “The result of the negotiations on the 2012 budget may prove a precedent for the much more important bargaining over the 2014-2020 Financial Framework”, concludes the Warsaw daily, stressing that the UK, supported by France and Germany, has already made it clear it won’t agree to any spending growth above inflation. The new EU Financial Framework is to be endorsed by the end of next year.

Like the architect who was locked by King Minos, along with his son Icarus, inside the labyrinth he had built himself, the European Union finds itself cornered by the crisis at a point where all the difficult paths lead to a dead end. On one hand, austerity policies imposed upon the Greeks for the past year: not only have they had practically no effect on either reducing the deficit or reforming a corrupt and inefficient system but, as many experts pointed out at the time, they annihilated the possibility of economic growth, which is necessary to surmount the crisis.

On the other hand, the bail-out packages: the 110 billion euros promised widened the psychological gap between northern and southern Europeans and led to a hardening of the German position during the negotiations, but without actually relieving the Greeks or proposing any real prospect of ending the crisis.

There is another option; restructuring the Greek debt. But that leads to immediate deadlock because European leaders fear that the market reaction will result in extending the crisis to other eurozone countries.

At the same time, some of these same leaders are heading towards greater economic integration and “crisis federalism” which would lead to the creation of euro bonds and a supranational coordination of fiscal and budget policies. But this latter option is stumbling over the divergent interests of the member states. In any case, increased political and economic integration is counter to prevailing public opinion which has expressed its euroscepticism in the ballot box.

In short, wherever one looks, the EU-Daedalus is in bad shape. And like the mythical character, it will have to find a way out from the top of the labyrinth. Surprisingly, a part of the solution came from the European Commission. This week, at the presentation of its 2014-2020 budget, the Commission ascribed “priority funding” to “cross-border projects in energy, transport and information technology”. It also proposed “significantly more money for Research and Innovation to invest in our competitiveness; and more funds for Europe’s youth”.

In other words, it has identified the fields Europeans should invest in (and invest themselves in) to climb out of the economic and social decline in which they are mired. Unfortunately, these fine prospects are in contradiction with the policies imposed by Brussels and the Member States on the countries in crisis and with the policies of most European countries. Furthermore, it’s known that the good intentions expressed by the Commission before the budget discussions which are about to begin don’t commit it to anything since, if all of its ambitions are revised downward, it will be able to shift the blame onto the Member States, or the Parliament.

True austerity versus paper ambitions: European leaders won’t be able to govern for long with this contradiction which the peoples of Europe live with daily. It’s when he forgot about reality that Icarus, son of Daedalus, scorched his wings.

Translated from the French by Pat Brett

“Less developed Central Europe has obtained a continuation of regional funding, while the priorities of the moment – energy and Internet access – appear to be respected. On the other hand, the financial transaction tax proposed by Brussels to alleviate pressure on the European treasury has already been greeted by a British veto," reports Le Figaro.

The tax on financial transactions (TFT) or Tobin tax, "levied at a rate that has yet to be determined, would affect all the activities of financial institutions within the EU and bring in between 50 and 70 billion per year," which would provide the EU with its own budget resources.

For Libération, the proposal amounts to "a revolution, especially when you consider that how the alter-globalisation movement has campaigned for just such a measure, while the incumbent EU administration is the most right wing to hold office since 1958 – a faithful reflection of the balance of political power in Europe (22 out of 27 member states have right-wing governments)." However, there is no guarantee that member states will be in a hurry to introduce a tax which a spokesman for the British government, quoted by Euobserver, has described as "unrealistic."

Another bone of contention between the Commission and member states is the issue of cuts to what Le Figaro terms “eurocrats’ salaries”: this group of "of approximately 50,000 privileged [civil servants], who have benefited from a remarkable immunity to the crisis, will have to endure the most hard-hitting wage review in 50 years," remarks the newspaper.

"To speak of a flare-up between the unions and management – which in this case is the Commission – and the shareholders, otherwise known as member states, is an understatement.” Brussels will have to act quickly to resolve a what is a serious equity and credibility issue: it cannot ask everyone else to tighten their belts while it continues to enjoy such an opulent lifestyle “insists the treasurer of one member state. Eleven countries – including France, Germany, the United Kingdom and most of northern Europe –  are now involved in the struggle, and have issued an ultimatum to José Manuel Barroso. Le Figaro has obtained a copy of a letter in which they insist: 'a significant reduction in spending, including cutbacks on wages, pensions and perks, will have to be implemented'. The offensive against “exisiting entitlements” has heated up, at a time when Greece has been forced to make enormous sacrifices."

As it stands, explains Público, "European rules dictate that structural funds to support development of the poorest EU countries must be co-financed, to the tune of 15% to 25%, by national governments." However, the crisis and the austerity polices adopted by the majority of member states "have severely limited their capacity to benefit from European aid." As of last week, the Commission has proposed that Greece be allowed to reduce its contribution to the structural funds, and that similar conditions should apply, starting in 2014, to all countries that benefit from structural funds.

The European Commission is set to launch the debate on the 2014-2020 EU budget on 29 June, and is also proposing to freeze spending at the 2007-2013 level. Policies described as “future-oriented” – research, innovation, education and neighbourhood policies – will nonetheless be granted budget increases, as will justice and interior affairs.

The use of the funds is contested, the French paper notes because “they are used more and more often to shore up the economies of Eastern European countries”. Dziennik Gazeta Prawna writes for its part that France has an interest in protecting the CAP, of which it is the primary beneficiary. While Poland, which benefits greatly from the structural funds, is threatened. Quoting MEP Jacek Saryusz-Wolski, the Polish daily explains that Poland “can count on the support of all the Central European countries. But it should also seek the support of “veteran” countries in particular Italy, Spain, Portugal and Greece”.

The EU Commission could also be an ally, Dziennik Gazeta Prawna suggests. But for Spanish daily El Pais, “the real budgetary battle won’t begin before June 2011 when the Commission will present its first draft budget for the 2014-2020 period”. This will be a difficult battle, warns Dziennik Gazeta Prawna because the main contributors to the EU budget are not “thinking of ways to narrow the gap between the ‘new’ and the ‘old’ Europe, but are just trying to find ways to survive”.

According to the daily, on 9 December MEPs and EU member states had failed to reach agreement, because “MEPs felt they had not been given sufficient say on the EU’s 2014-2020 Financial Perspectives and the question of the EU raising its own finances.” However, if the Commission had not presented a revised budget, “the new European External Action Service and European system of financial supervisors (ESFS) would have begun 2011 without a penny.” And certain European politicians would have been reduced to a diet of bread and water.

In a vote that “acknowledged member states’ arguments on the need to reduce EU spending in the current context of austerity, the parliament accepted a limited budgetary increase of 2.91% for 2010, whereas in October it had voted for a 5.9% rise,” notes the Brussels daily. “In 2011, spending will be capped at 126.5 billion euros, for 141.8 billion euros of commitment appropriations. In exchange parliament obtained a pledge from the Commission that it will present proposals on the EU raising its own finances in June of that year, within the framework of negotiations on the EU’s Financial Perspectives.”

For the Financial Times, the “unexpectedly stubborn stance" of member states has been prompted by "a desire to punish a Parliament that has grown increasingly assertive – some say grasping – since the Lisbon treaty came into force in December." MEPs believe that their demand for greater powers "is simply democracy," notes FT: "they are, after all, the only popularly-elected body in Brussels and they must be reckoned with."

For Gazeta Wyborcza, "the fiasco is proof that the battle for power within the EU has only just begun." If "the outcome of the conflict is a defeat for Parliament and victory for a handful of governments led by London, we will be faced with the prospect of the progressive dismantling of the EU."

The Warsaw daily argues that the debate is not just about money but about national governments’ willingness to discuss the process for drafting the EU budget and the issue of EU financial resources with MEPs. Parliament’s participation in budgetary negotiations will add to the legitimacy of the EU and ensure that future budgets are of equal benefit to all the EU’s member states and not just a handful of countries.

On 15 November, "it appears that a number of governments chose to obstruct the 2011 EU budget to avoid establishing a precedent. They were probably also planning to substantially reduce the budget in the future. However,” Gazeta Wyborcza warns, “if this idea prevails, instead of growing the EU will shrink."

According to the news website, negotiations broke down because member states were reluctant to grant MEPs extra powers in future multi-annual budget negotiations. British and Dutch ministers refused to “discuss contentious issues for the long-term budgetary perspective, such as raising more EU ‘own resources’ through supplementary taxes or the ‘flexibility’ of the budget when unexpected expenses arise.” 

“Member states were demanding that the increase to the budget be  limited to 2.91% (on an amount of 123 billion euros),” points out Le Soir, “and parliament had finally accepted this rate of increase, even though it had initially hoped for twice as much. MEPs are not indifferent to the budgetary difficulties that are currently being experienced by most if not all of Europe’s member states.” However,the Brussels daily adds that “the battle over the budget is a highly political one. The European Parliament wants to move ahead into the future. In particular, it wants to have a say on the future financing of the Union.”

Hot on the heels of this initiative, MEPs concluded an inter-institutional framework agreement (FA) with the European Commission that will allow them greater powers, notably in fields of international negotiations and access to classified documents. The European Council, which deliberately stayed away from negotiations on this issue, has announced that it is contesting the validity of the FA and will file a claim with the European Court of Justice in the event that "the European Commission or Parliament applies the agreement in a manner that undermines its interests and prerogatives."

The European Parliament has demonstrated its awareness of the new powers it has obtained under the Lisbon Treaty and its intention to make use of them – and it appears to have the support of the Commission in this regard. Only, the European Council, which directly represents EU member states, seems to be thwarted rather than empowered by the new rules. With this in mind, it is rowing against the tide to maintain the existing status quo. In the new framework defined by Lisbon, Europe’s three major institutions are marking out their territory, and the elected representatives of Europe’s citizens are moving quickly to claim new ground.