Fear of failure looms over EU budget summit

PUBLISHED : Thursday, 22 November, 2012, 11:31am
UPDATED : Thursday, 22 November, 2012, 11:46am

An EU budget summit seemed set for trouble before it began on Thursday as leaders were to start two days of talks to agree a trillion-euro budget that has bitterly divided a 27-nation union already mired in crisis.

European Union officials were scrambling to find an all but impossible compromise on the 2014-2020 budget that could successfully move richer nations looking for cutbacks closer to poorer ones who look to Brussels to prop up hard hit industries and regions.

“All the talk is only about cuts,” said the head of the EU executive Jose Manuel Barroso in an impassioned speech before the European parliament on Wednesday.

“No one is discussing the quality of investments, it’s all cut, cut, cut.”

Much of the European Union is in or dangerously close to recession and austerity-driven nations led by British Prime Minister David Cameron are demanding huge cuts in EU spending to match belt-tightening at home, raising the ire of cash-strapped nations to the east and south.

Central to the upcoming two-day battle, that diplomats fear could drag on even longer, are development funds, the billions of euros outlayed each year to the EU’s newer and poorer entrants so they may make up the economic lag with rich neighbours.

These poorer countries, mostly net beneficiaries of the EU budget, have pledged to fight dearly to preserve funds that eurosceptics to the west and north hint are wasted, generating little real growth.

Eight of the net contributor nations -- Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden -- have banded together to demand spending cuts, though they are far from being on the same page on what should go or by how much.

Lined up against them are 15 nations who are net recipients, most often of the so-called “cohesion funds” used to help poor regions catch up. This is the second biggest budget item after the CAP.

Chaired by Poland and Portugal, the group includes Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Romania, Slovakia, Slovenia -- and most recently, once mighty Spain.

Farm and fishing subsidies, funnelled through the EU’s huge Common Agricultural Policy, are another bone of contention, especially for France which is the biggest beneficiary by far of what is the budget’s biggest line item.

French President Francois Hollande has vowed “to fight” to keep France’s prized farm subsidies, which is viewed as an red line not to be crossed by the powerful agricultural lobbyists in Paris.

In defending the CAP, Hollande this week lashed out at countries that defended rebates and discounts, the third hot-button issue that could send the budget summit off the rails without an agreement.

Hollande did not name any specific countries, but Britain in particular cherishes its budget rebate, won by prime minister Margaret Thatcher in the 1980s and which has since become a potent symbol of London’s defiance to European meddling and bureaucrats.

Germany, the Netherlands, Sweden and Austria are also demanding to keep their rebates and Denmark is seeking one too.

Before the start of the summit at 7pm local time on Thursday (1am HK time on Friday), EU president Herman Van Rompuy is to sit down with individual heads of state and government to finesse a one-size-fits-all compromise.

“Let there be no mistake: the absence of an agreement would be harmful for all of us,” Van Rompuy said in a summit invitation letter to the EU’s 27 leaders which also pledged “a revised version” of the budget when leaders begin the two-day talks.

Britain had appeared to warm towards a proposal made last week by Van Rompuy for a 75-billion-euro decrease in the 1.047-billion-euro (US$1.3 trillion) budget that would leave Britain’s rebate intact.

But Cameron, who is expected to meet Rompuy head-to-head early Tuesday in Brussels, told Britain’s parliament he would be “fighting incredibly hard for a good deal.”

German Chancellor Angela Merkel told lawmakers Wednesday she did not “know if we will have a definitive deal” by Friday. “If necessary we will have to meet again at the beginning of next year,” she said.