An upcoming overhaul of the European Union's budget will keep the bloc's farm aid system and is unlikely to involve any pan-EU tax, the bloc's new budget chief said.

The next long-term EU budget for 2014-2021, likely to be worth hundreds of billions of euros, should be more focused on research, development, innovation and the bloc's foreign policy, European Budget Commissioner Janusz Lewandowski told Reuters.

Negotiations likely to start this year on EU spending will be tough as member states suffer from the economic crisis, he said in an interview.

"A post-crisis Europe, struggling with the fiscal effects of stimulus packages and heavily indebted, is not an environment in which talks about money will be easy," he said.

Lewandowski will help draft proposals on the budget overhaul at the new European Commission, the EU executive, whose five-year term started in February.

The current EU budget is worth some 125 billion euros ($170 billion) annually, or just over 1 percent of economic output. Lewandowski refused to speculate on whether this level would survive expected attempts at reduction by the bloc's net payers such as Germany and Britain.

"The budget of 1 percent of economic output is not one that matches the political ambitions of the EU and increasing numbers of EU policies," Lewandowski said.

While there is broad agreement that the 27-nation EU should increase spending on innovation, doing so is unlikely to mean scrapping or seriously cutting the bloc's agriculture support system, now worth more than 40 percent of the budget.

"The farming lobby is not a weak one. It is a strong group of countries. The common agricultural policy will survive. I myself am against renationalisation of farm policy because that could distort the EU's single market," Lewandowski said.

Agriculture powerhouse France, Lewandowski's homeland Poland, Romania and Ireland are expected to defend EU farm spending.

EU TAX UNLIKELY

Lewandowski said future farm spending could be more oriented towards EU priorities, such as fighting climate change and producing energy from renewable sources, and less towards direct subsidies for farmers.

He added that he did not expect future revenues to be based on any new pan-EU tax. Proposals on such a levy have ranged from a tax on financial transactions to an energy tax or proceeds from selling permits to emit carbon dioxide.

Any decision on taxes requires unanimity among EU countries, which would be hard to achieve.

Lewandowski said he expected the current system of national contributions based on the size of economies and tax revenues to be simplified, including scrapping or scaling down various exemptions, such as the British rebate from EU coffers.

He said the Commission would propose in mid-2010 its first ideas on the budget overhaul. Details of reforms will come in early 2011, while the size of the budget and spending levels will be proposed in May or June.

He voiced hope that EU governments would clinch a deal on the long-term budget at a summit in June 2012, when Denmark will hold the EU's six-month rotating presidency, so as to proceed to negotiations with the European Parliament.

Reuters; Balkans.com