The European Commission will propose this week boosting the European Union's budget by 5.9 per cent compared with this year, to €112.6 billion in 2006, officials said today.
The EU executive body's draft budget for next year, due to be unveiled tomorrow, is seen as a compromise between member states which advocate financial austerity and those which back a spending increase to better finance the EU's recent enlargement.
The draft, which will be debated jointly by member states and the European Parliament, will play an important role in difficult negotiations on the EU's budget for 2007-2013, which the bloc's foreign ministers were discussing on Monday.
"The Commission is expected to propose increasing the 2006 budget by 5.9 per cent to some €112.6 billion," a Commission official said, asking not to be identified.
The Commission's proposal would set EU spending at 1.02 per cent of gross national income (GNI), compared with about 1 per cent for this year or €106.3 billion.
Next year's budget is important because it will serve as a reference for budgets in the following years if EU members fail to agree on the long-term spending plan, which some diplomats say is possible.
The EU's main net payers - Austria, Britain, France, Germany, the Netherlands and Sweden - demand that spending be frozen at 1 per cent of GNI in 2007-2013.
They argue that the budget must not grow at a time when many governments are struggling with high budget deficits amid sluggish economic growth.
The Commission has proposed increasing the long-term budget to 1.14 per cent of GNI on average over seven years and received initial support from the EU's 10 new members and poorer "old" members from the south, such as Spain and Portugal.
The Commission has said EU finances would be thrown into chaos if the bloc's leaders fail to respect their deadline to clinch a deal on the budget in June.
A string of elections and referendums on the EU's new constitution could mean that an agreement will come only at the last moment - late in 2006, after general elections in Germany. If EU members fail to reach a deal on the long-term budget by the end of 2006, than next year's budget would serve as a base for annual spending plans in subsequent years, which will be raised by an index linked to inflation and economic growth.
About 42 per cent of the EU budget goes to the costly Common Agricultural Policy and about one third to regional aid aimed to build motorways, clean up the environment and create jobs.