European Space Agency Members Approve Flat 2012 Budget

by

PARIS — The European Space Agency (ESA) will have 4 billion euros ($5.2 billion) to spend in 2012, essentially flat from 2011 as a decline in contributions from its member governments is offset by increased payments from the European Union’s executive commission, ESA officials announced Jan. 10.

In what may be an unprecedented development, it is Germany, and not France, that will be ESA’s biggest investor in 2012.

The 19-nation agency, which is expected to include Poland as its 20th member in 2012, has so far managed to avoid any severe budget impacts despite the fact that several of its member governments are struggling with massive public debt.

In a press conference at ESA headquarters here, ESA Director-General Jean-Jacques Dordain said only a couple of nations have asked the agency to reschedule their planned payments, and none of these is among ESA’s major contributors.

Dordain said a total of no more than “several 10s of millions of euros” will need to be rescheduled, an amount that ESA will be able to handle through its own cash flow. Dordain declined to name the nations that have asked for financial relief.

He also said the amount of money in question will not require ESA to take out special loans on behalf of the financially pressed member states, despite the fact that the agency has the authority to do so and has done so in the past.

“If these nations have difficulties it is because of their budget deficits, and I don’t want to add to these deficits. So long as they are small contributors, we can manage this — with the full approval of the other member states,” Dordain said. “So today we have no payment problem, but we are paying close attention to this. A problem of several 10s of millions of euros out of a budget of 4 billion euros can be managed internally. If it became a problem of several hundred million euros, then we would have to take out a loan.”

Among the smaller ESA contributors with known sovereign-debt problems are Portugal and Greece, which respectively account for just 0.5 percent and 0.3 percent of ESA’s planned 2012 budget.

The financial problems affecting many European governments have not forced ESA to cancel or substantially modify any of its approved programs, Dordain said. He said he has informed cash-strapped governments that it is preferable to adjust their payments rather than decide to quit an ESA program already approved.

This is important at ESA, because the agency’s rules throw into question the legal viability of a program if even small contributors formally bow out, a process that could require the remaining participants to formally readjust and restate their commitments to make up for the departing member state.

Dordain said the agency is doing what it can to minimize the financial burdens it imposes on contributing governments.

One way he is doing this, he said, is to reduce the amount of financial margin that ESA includes when it asks governments for milestone payments to ESA programs. These financial cushions in the past enabled the agency to pay industrial contractors in the event the contractors performed work more quickly than planned. Retaining financial margins also enables ESA to address unanticipated cost overruns that remain within predetermined program limits.

But insisting on financial cushions also occasionally found the agency with an unneeded, and occasionally embarrassing, cash pile at the end of the calendar year.

A second way ESA is reducing its cash demands on member governments is by decreasing the agency’s internal operating costs. Dordain has set a goal of cutting ESA’s internal costs by 25 percent by 2015. These costs totaled about 685 million euros in 2010, and ESA hopes to cut this figure by 175 million euros by the end of 2015. Dordain said in 2011 the agency was able to trim its internal costs by “several 10s of millions of euros.”

“I have absolutely no reason to complain about the budget our member states voted for ESA in 2012 given the economic climate we are in,” Dordain said. “I take it as a statement of their belief in the value of space spending as an investment in the future. And as I have said before, space as an industrial activity is strongly rooted in Europe and is not transferred abroad. In the current climate, that is not a small thing.”

ESA’s annual budget is composed of contributions from its member states and associate member, Canada; income from the executive commission of the 27-nation European Union, which hires ESA to manage certain projects; income from nations outside ESA that contribute small amounts as so-called Cooperating States; and “other income,” which is revenue generated from contract work ESA performs for other agencies, including Europe’s Eumetsat meteorological satellite organization.

In 2012, ESA’s 19 member states have agreed to contribute 2.9 billion euros to the agency’s activity, down 2.5 percent from 2011. Greece and Britain are notable among the nations lowering their contributions. Britain, which is ESA’s fourth-largest contributor, is reducing its payments in 2012 by 9.5 percent, to 240 million euros. Greece is dropping its contribution by 42 percent, to 8.6 million euros.

For perhaps the first time in ESA’s history, Germany in 2012 is overtaking France as ESA’s biggest contributor. The German contribution, at 750.5 million euros, is up 5 percent from 2011. French funding, at 718.8 million euros, is flat from 2011.

Germany had been expected to overtake France as ESA’s biggest backer given German contributions to large programs the agency adopted in November 2008 at a conference of ESA ministers. The next conference is scheduled for November.

 

RELATED ARTICLE

ESA Budget-cutting Plan Targets Operating Costs