November 16, 2010 / 12:07 AM / 9 years ago

EU negotiations on 2011 budget collapse

BRUSSELS (Reuters) - Negotiations between European Union lawmakers and governments over the EU’s 2011 budget hit a deadlock on Monday, threatening to throw EU financial planning into chaos and boding ill for the bloc’s ability to reach deals.

It is the first such setback for the EU since 1988. It means that next year’s spending will be the same as in 2010, inflexible and disbursed in 12 equal instalments while the EU’s fledgling diplomatic service may not receive funding.

The talks failed when a group of countries led by Britain rejected the parliament’s demands for guarantees over future EU financing and a declaration that would clarify the lawmakers’ role in the bloc’s financial planning under a new Lisbon treaty.

“I regret that few member states closed the door to the 2011 budget agreement,” said EU Parliament President Jerzy Buzek after a deal was not reached by Monday’s midnight deadline.

The EU’s budget is a sensitive issue in many of the EU’s 27 member states this year — especially in Britain — because governments are slashing spending at home and are under pressure to reject big increases in EU expenditure.

The Parliament offered to drop its demand for a 6.2 percent increase in the budget from last year’s 123 billion euros (104 billion pounds) and to back a 2.9 percent rise, the maximum that governments are ready to accept.

But diplomats said Britain, Sweden and the Netherlands did not want to discuss the parliament’s political demands over its future role in negotiations at the occasion of talks on the 2011 spending plans.

“Most of the parliament’s demands had nothing to do with next year’s budget,” said one EU diplomat.

By law, the executive European Commission will propose another budget draft and its approval procedure will start from scratch, which could leave the EU without a budget for 2011.

Some diplomats say that in theory next year’s budget could still be approved by the end of 2010 and the issue could be discussed at the EU’s summit in mid-December.

The battle over the 2011 budget is especially tough as it is seen as a prelude to a bigger fight over the EU’s long-term spending plan for 2014-2020.

EU Budget Commissioner Janusz Lewandowski has warned such an emergency procedure would throw EU financial planning into chaos and some EU programmes would be undermined, such as the bloc’s new diplomatic service or European nuclear fusion project ITER.

The EU’s newly created bodies to supervise financial market could also be denied funding, although they are not expected to be very costly.

The failure is also another bad sign for the EU’s negotiating machinery, following months of quarrels this year over a bailout mechanism for euro zone countries in financial distress.

More than two-thirds of the EU budget goes on aid to poor regions and farm subsidies. The remainder is spent on research, foreign aid, internal security and administrative costs. The budget represents about 1 percent of the EU’s economic output.

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