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Andy Klom, the European Commission's man in Wales, explains the backdrop to budget negotiations in Brussels.

The European Commission recently proposed a budget for Europe 2020 - the EU's economic strategy for smart, sustainable and inclusive growth.

The EU budget covers the seven years from 2014 to 2020, after the current budget ends in 2013.

Legally, the Commission proposes the budget, but the European Council and the European Parliament must approve it.

Parliament wants budget growth, but some governments want it frozen. The UK has already clashed with Parliament over this in 2010.

The Commission has taken a middle position, using the 2013 annual budget and multiplying it by seven. The idea actually came from the UK.

A fixed budget in a growing economy will represent a smaller percentage of EU GDP by 2020.

Currently, 23 of the 27 EU members have expanding budgets, some even with booming economies. The UK is an exception.

Parliament and many other governments have a different outlook to the UK. Given this, we will certainly face difficult negotiations over the next year within the Council and with Parliament.

Too often we hear about wasteful EU spending, but we never hear that 94% of the EU budget is actually spent in the countries of Europe, not in Brussels.

Nor do we hear that the entire EU budget only accounts for about 2% of total public spending in the EU.

Innovation

Limited though it is, the Commission proposes to use the next budget to invest in growth, jobs, prosperity, and especially in innovation to tackle the many challenges we face.

The Commission wants to boost research spending to stimulate businesses, SME's and universities. We want to raise education spending to strengthen cross-border programmes like Erasmus for students, Leonardo or Grundtvig for vocational or adult training. Investing in Europe's future means investing in people, particularly through the European Social Fund.

A European budget has an added value beyond what members can do themselves.

It supports common policies like agriculture, where the EU budget makes up 70% of total spending in Europe. It is much more expensive to run 27 separate agricultural policies than just one.

Europe is a single market, but this single market needs to be physically connected. A Connecting Europe Facility should solve bottlenecks in roads, railways and broadband, which no individual country is able to fund.

Climate change is our biggest challenge, which is why climate action will be mainstreamed throughout the budget, with 20% of spending targeted at it: in the CAP, in convergence, in research.

The EU budget also provides support to those less well placed in Europe.

Wales has received EU funds since 2000, first in what was called Objective 1 and now Convergence.

The Commission proposes to continue cohesion funding in all EU countries, aiming at three categories: less developed, transitional, and developed countries.

Which category applies to Wales is not clear, we will know when the final budget decision is taken by Council and Parliament.

However, the Commission proposes substantial spending focussed on the Europe 2020 objectives, which should help all of Europe, including Wales, overcome the present economic difficulties .