EU's Van Rompuy proposes budget compromise in tight talks

BRUSSELS Thu Feb 7, 2013 11:01pm GMT

1 of 6. Britain's Prime Minister David Cameron arrives at the EU council headquarters for an European Union leaders summit meeting to discuss the European Union's long-term budget in Brussels February 7, 2013.

Credit: Reuters/Yves Herman

BRUSSELS (Reuters) - The European Union's chief budget negotiator proposed further modest cuts to the bloc's long-term spending plan on Thursday to try to bridge deep divisions among member states on how nearly 1 trillion euros of funds should be spent.

European Council President Herman Van Rompuy, who chairs EU summits, delayed the start of negotiations by more than five hours and initially withheld his budget plan because he felt governments remained too far apart to strike a deal.

The budget, which covers spending for 2014-2020, tackles everything from agricultural subsidies to scientific research, roads and infrastructure, foreign aid and development assistance and is fought over bitterly, often along national lines.

While vast as a headline figure, it is relatively small in terms of annual GDP, amounting to around 1 percent of the EU's total output, or around 150 billion euros a year.

European Parliament President Martin Schulz said Van Rompuy had suggested a slight cut in the headline amount that can be pledged for spending, known as commitments, but a deeper cut to payments, the maximum sum that can actually be spent.

"President Van Rompuy set out a compromise which would involve spending of 960 billion - we are talking about commitment appropriations here - whereas payment appropriations would just run to about 910-913 billion euros," he told a news conference, saying he didn't like the proposal.

The budget must be unanimously supported by all member states and approved by the parliament to become law, making the parliament's position a factor in negotiations.

That further complicates deal-making on a package that often divides northern European countries that want to keep spending tight and southern and eastern European states that want to maintain funding for infrastructure and farming.

Ahead of the summit, France and Britain appeared at sharp odds over the headline numbers.

Cameron said he wanted to see "tens of billions" of euros cut from the 972 billion euro plan Van Rompuy put before the leaders at a summit in November, when it was not possible to reach a deal.

In order to get the figures down to where Cameron would like to see them, it would more than likely mean cutting into programmes such as farming subsidies that France, Italy, Spain and other countries staunchly defend.

Hollande pledged to defend agricultural spending, and warned that there was a limit to how far he was prepared to go.

"If there are some who are not reasonable, then I will try to reason with them, but (only) up to a certain point," he said in a thinly-veiled reference to Cameron's demands.

NARROW GAP

While Thursday's summit got off on a poor footing and there were concerns that negotiations could run long into Friday and even Saturday, officials involved in the talks said the gap between member states was not as wide as it appeared.

"It's similar to national budget negotiations - there's lots of noise but it's mainly political," one EU official said.

If it is not possible to reach an agreement in the coming days, the concern is that it may not be possible to return to negotiations until late 2014 or early 2015, a delay that might further undermine international faith in EU decision-making.

Even if a deal can be struck on the seven-year framework, around 40 percent of the spending will still be dedicated to farming and regional development, something that frustrates many northern European states, which want a more dynamic budget.

In recent weeks, Van Rompuy has been in touch with every EU leader to assess where the contours of an agreement may lie. He had said that he would only call a summit if he saw sufficient "convergence" among the countries to make a deal possible.

In November, he began the talks by reducing the European Commission's original budget proposal by around 80 billion euros, bringing the headline figure down to 972 billion.

Thursday's talks were supposed to resume from that figure, although it was never going to be a simple question of just cutting the total, since the budget also involves delicate negotiations over rebates - amounts countries get reimbursed after they have made contributions.

There is also a difference in how countries interpret the budget figures, with some focusing more on commitments, while other such as Britain concentrate on payments.

Payments are always less than commitments, and any deal may ultimately rest in the gap between the two.

Northern European states, including Britain, Denmark and the Netherlands, are adamant that at a time when they are trying to cut budgets at home to bring finances into balance, it is incumbent on the EU to pursue a similar objective.

After the European Parliament president expressed his frustration at the drive for deeper budget cuts, diplomats were quick to point out that spending couldn't endlessly rise.

"It is quite bold for the European Parliament to run a campaign on the premise that voters yearn to cut more at home to pay more to Brussels," one diplomat said.

(Addtional reporting by Justyna Pawlak, John O'Donnell and Teddy Nykiel; writing by Charlie Dunmore and Luke Baker; editing by Luke Baker)

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Comments (6)
SCSCSC wrote:
Farm subsidies? The last thing that Europe needs is more of the same.

The French agreed to review the CAP in return for Tony Blair giving up GBP2Bn p.a. starting in January 2012. The UK has paid up but the French have not honoured the deal. This is Europe “a la carte”, is it not Monsieur Hollande?

The EU is about to show the world that it is still as dysfunctional as ever and has no strategy for dealing with the debt crisis or, more importantly, generating growth.

What is more, from a UK perspective, we will view Cameron as having failed if he allows an EU budget increase that is greater than the spending cuts that we are experiencing in the UK.

The poorer countries of Europe (such as Poland) and the hopeless Club Med (which now includes France) are in trouble and want the rest of the contributing EU nations to continue to subsidise their lifestyles, despite the fact that a considerable percentage of their populations have ended up moving to countries like the UK.

The only show-stopper, of course, is that the perceived richer countries are funding this out of DEBT.

The EU’s economy accounted for an estimated 22% of global output before the crisis started in 2008 and is now at 18%. It is predicted to be at 12% by 2020. I see nothing on the table at this EU conference that will stop this from happening.

Europe needs to be competitive and it is now time to call an end to this unelected, unaccountable and clearly hopeless EU. The UK can and must do better than this.

I, for one, do not want to have to explain to our children why they have a pile of debt to pay back and no jobs to help pay it back with.

Feb 07, 2013 6:36pm GMT  --  Report as abuse
2writestoo wrote:
The selfish isolated British shall use the veto to scupper the EU budget conference so France has declared with monotonous regularity since November. Looks very much like the selfish and isolated French and Italians will now veto the budget. How did that happen François ?

Feb 07, 2013 8:45pm GMT  --  Report as abuse
2writestoo wrote:
The selfish isolated British shall use the veto to scupper the EU budget conference so France has declared with monotonous regularity since November. Looks very much like the selfish and isolated French and Italians will now veto the budget. How did that happen François ?

Feb 07, 2013 8:45pm GMT  --  Report as abuse
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