EU leaders warn budget deal far off

PUBLISHED : Friday, 23 November, 2012, 10:58am
UPDATED : Friday, 23 November, 2012, 11:14am

European leaders voiced doubts Friday on reaching agreement on a trillion-euro EU budget for 2014-2020, as gruelling talks pushed into a second day with a deal to bridge bitter divisions seeming increasingly distant.

The summit talks in Brussels were suspended overnight after less than an hour and a half, having already begun hours late on Thursday due to the vast differences on the need for cuts between the bloc’s have and have-not nations.

The talks were scheduled to resume at 7pm (HK time) on Friday once delegates from the 27 nations have had time to examine new proposals on the 2014-2020 budget submitted by EU president Herman Van Rompuy.

But with an increasingly eurosceptic Britain threatening to wield its veto, and splits throughout the EU over the level of spending, German Chancellor Angela Merkel warned that the EU may have to wait until a future summit for any agreement.

“I think we’re advancing a bit, but I doubt that we will reach a deal,” Merkel said as she and her fellow leaders left the first session of talks.

French President Francois Hollande warned that a failure to reach a deal was increasingly likely.

“It’s what everyone has in mind,” Hollande said as he left for the night, due back hours later to try to breach the divisions.

The first round of talks followed a tough day of face-to-face meetings between Van Rompuy and each of the bloc’s leaders, followed by a flurry of backroom bilaterals to discuss the trillion-euro budget.

“Maybe this meeting will be long and complicated,” Van Rompuy said as the two-day talks opened. “Fortunately this issue only comes up every seven years,” he added wryly.

Before wrapping up for the night, leaders first nominated Luxembourg’s Yves Mersch to the executive board of the European Central Bank, despite a row over a lack of female candidates for the job.

Ahead of the summit France and Germany, whose cooperation is often the much-needed driving force for a breakthorugh in tough EU negotiations, called for efforts to find common ground.

“I have come to seek a compromise, not to set an ultimatum,” said Hollande.

But the threat by British Prime Minister David Cameron to wield his veto unless the EU meets his demands for substantial cuts in the proposed budget, weighed heavily on the proceedings, with leaders of the EU’s poorer nations ready to battle for funds many richer nations seemed convinced need to be slashed.

A new draft proposal from Van Rompuy, aiming to accommodate the 27 different points of view of the EU member states, was circulated to heads of state and government for discussion at a dinner during the talks.

Cameron, who is under constant pressure from eurosceptics in his Tory party to battle supposed European meddling and bureaucracy, had vowed to bring down the budget from a proposed 1.047 trillion euros to 886 billion euros.

Rompuy’s new proposal reintroduces an earlier figure of 972 billion euros in spending, which comes to 1.01 per cent of the EU’s total economic output.

His latest blueprint also spreads the funds more generously to sensitive envelopes like the cohesion funds for regional development, and the Common Agricultural Policy, the farm subsidiees cherished by France that are the budget’s biggest single item.

Rompuy backed off from threats to cut EU operational costs in his new plan, a proposal that had triggered social movements by workers from EU institutions.

Amid the gloom, Austria’s Chancellor Werner Faymann raised the idea of a fresh summit in January and February, as did the premiers of Italy and Spain, Mario Monti and Mariano Rajoy.

“We will not accept the unacceptable,” warned Monti.

Italy is among the countries that contribute more to the EU budget than they get back, known as the “net contributors”, while once mighty Spain recently joined the camp of those who get more cash than they put into the common pot.

Britain is the most vocal of the group of austerity-driven contributor nations seeking EU budget cuts to match belt-tightening programmes at home.

“No, I’m not happy at all,” Cameron said on arrival.

Austria, Britain, Denmark, France, Finland, Germany, the Netherlands and Sweden have banded together to demand spending cuts, but are far from being on the same page regarding what should be cut or by how much.

France, the biggest recipient of farming funds, has rejected proposals to cut spending on the Common Agricultural Policy (CAP), the largest item on the budget.

But so-called Cohesion Funds -- billions of euros outlayed each year to the EU’s newer and poorer entrants so they can catch up with richer neighbours -- are also central to the battle at the summit.

The third hot-button issue will be rebates.

Britain in particular cherishes the budget rebate obtained by then prime minister Margaret Thatcher in 1984 on the grounds that London was paying too much into the bloc’s coffers.