EU budget talks end in failure

Tensions between rich and poor states and UK demands for austerity had set Brussels summit on rocky course from start.




A European Union summit in Brussels has wound up with "no agreement" sealed for the bloc's next long-term budget.

With the 27 heads of state and government bitterly divided over spending policy, there had been little hope of a deal on a trillion-euro budget for 2014-20 during the two-day summit.

"There is no agreement," one EU official said on Friday.

Tensions between rich and poor states and Britain's demands for austerity in the budget for the seven years from 2014 to 2020 had set the summit on a rocky course from the start.

Britain was cast as the potential chief spoiler at the meeting, with David Cameron, UK prime minister, threatening to wield his veto unless spending was frozen in real terms, arguing that at a time of austerity at home the EU must also make cuts.

Britain, like many countries across Europe, is responding to economic crisis with major public spending cuts and Cameron argues that at a time of austerity at home, the EU must also make deep cuts.

Nearly a year after he angered his European counterparts by vetoing a pact to resolve the eurozone crisis, Cameron was again at odds with them by demanding cuts to the perks enjoyed by so-called eurocrats - the well-paid EU civil servants frequently targeted by the British press.

Main obstacle

An EU diplomat said the main obstacle at the summit was Cameron's demand for reductions in the planned trillion-dollar budget, adding that "the most virulent" countries seeking cuts were Britain, Sweden and the Netherlands.

Cameron had pledged to bring down the budget from a proposed 1.047tn euros ($1.347tn) to 886bn euros.

Herman Van Rompuy, EU president, submitted new proposals on Friday that reintroduced his own earlier figure of 972bn euros in spending, which comes to just over one per cent of the EU's total economic output, the usual benchmark used in Brussels budget talks.

The latest blueprint which negotiators worked from on Friday spread the funds more generously to sensitive envelopes like the "cohesion" funds for regional development, and the Common Agricultural Policy, the farm subsidy programme cherished by France that is the budget's biggest single item.

But that was not enough, and EU leaders gave up mid-afternoon.

The first recriminations beegan to fly, with a British source criticising a lack of preparation by Van Rompuy for the summit, saying it made negotiations more difficult.

So-called cohesion funds - billions of euros outlayed each year to the EU's newer and poorer entrants in the south and east of the continent so they can catch up with richer neighbours - were also central to the battle at the Brussels summit.

The funds were defended tooth and nail by the 15 Friends of Cohesion nations - led by Poland and Portugal - who are net beneficiaries of the EU budget.

Agricultural subsidies

The cohesion funds are the second-biggest budget item after CAP payments to farmers and fishermen, which are another bone of contention.

France is by far the biggest CAP beneficiary, and French President Francois Hollande pledged to fight to keep the prized agricultural subsidies, while denying he was purely defending national interests.

Earlier this week he criticised countries which defended budget rebates, the third contenious issue at the summit.

He did not name any specific countries, but Britain in particular cherishes its budget rebate, which Margaret Thatcher, then prime minister, obtained in 1984 on the grounds that UK was paying too much into the bloc's coffers.

The British rebate was worth 3.6bn euros last year, and Cameron promised on Thursday that he had no plans to give it up.

Germany, the Netherlands, Sweden and Austria also insisted on keeping their rebates.

The sense of summit crisis was heightened by the failure on Wednesday at a eurozone finance ministers' meeting to unblock bailout funds needed to keep Greece from bankruptcy.