Infighting ties up EU billions for energy security

By Pete Harrison and Julien Toyer

BRUSSELS (Reuters) - A plan to spend billions of euros on overhauling the European Union's energy infrastructure has become mired in internal squabbling that could deprive the region's struggling economy of a timely stimulus.

In January, European Commission President Jose Manuel Barroso proposed spending 3.75 billion euros (3.3 billion pounds) of "spare" EU funds to shore up infrastructure after this winter's gas crisis left thousands of East European households shivering.

The crisis, caused by a spat between Moscow and gas transit country Ukraine, shook the 27-nation bloc, which has been more uneasy about its reliance for energy on the newly assertive Moscow since Russia invaded neighbouring Georgia last August.

The plan to subsidise new power projects and hundreds of kilometres of gas pipelines and power cables was meant to enable the bloc's member states to help each other during gas crises.

It would tackle the economic crunch by creating new jobs for steel workers, engineers and local trench diggers.

It also aimed to help the EU reach its environment goals.

So far so good, but to win backing from big financial contributors like Germany and France, the plan listed many projects in their territory -- even though the gas crisis only really hit southeastern states such as Romania and Bulgaria.

That politically pragmatic approach has opened the project to attack, and the battle rages about where the money will be spent.