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EU Summit Ends Without Budget Deal Due to British-French Differences

EU budget summit ends without deal, retry in 2013

By Charlie Dunmore and Luke Baker

Fri Nov 23, 2012, 5:50pm EST

BRUSSELS (Reuters) -

European Union leaders failed to reach agreement on Friday on a new seven-year budget for their troubled bloc, calling off talks in less than two days after most countries balked at far deeper spending cuts demanded by Britain and its allies.

European Council President Herman Van Rompuy said they decided to end a special summit on the 2014-2020 EU budget, worth about 1 trillion euros, and would try again early next year rather than continue negotiating into the weekend.

"The bilateral talks yesterday and the constructive discussion within the European Council show a sufficient degree of potential convergence to make an agreement possible in the beginning of next year. We should be able to bridge existing divergences," Van Rompuy told a news conference.

"My feeling is that we can go further (in cuts) but it has to be balanced and well prepared, not in the mood of improvisation, because we are touching on jobs, we are touching upon sensitive issues," he said.

The leaders mandated Van Rompuy and European Commission President Jose Manuel Barroso to try to close the gaps between member states in the coming weeks. Officials said the most likely date for resuming the talks was February.

Chancellor Angela Merkel of Germany, the biggest contributor to EU coffers, said she had not expected a deal at the first attempt and played down the consequences of failure, saying there was a real potential for agreement at the start of 2013.

"I have always said that it wouldn't be dramatic if today were only the first step," she told reporters.

The last time the EU held its marathon budget negotiations in 2005, it took six months and an acrimonious failed summit at which Britain wielded its veto before a deal was finally found.

There was no such drama on Friday. But EU officials warned that failure would divert time and resources away from efforts to shore up the faltering euro zone, and reinforce an impression among the bloc's 500 million citizens and among investors that EU leaders suffer from collective indecision.

Financial markets were unmoved by the breakdown, focusing more on growing prospects of a deal next Monday to release urgently needed aid to ailing euro zone member Greece.

If the budget impasse drags on, it could delay programming of hundreds of billions of euros in investments in transport and energy in poorer ex-communist eastern members of the 27-nation bloc, meant to help them catch up with the richer west.

"PARALLEL UNIVERSE"

British Prime Minister David Cameron said a compromise plan tabled by Van Rompuy that scaled back cuts in farm subsidies and regional aid to placate France and Poland was "just not good enough", given the austerity that governments were implementing at home. He said other northern EU countries that contribute more to the budget than they get back felt the same way.

Cameron said a deal was still possible on the EU budget but the European institutions were "living in a parallel universe" and must adjust to the real world of budget cuts.

Lithuanian President Dalia Grybauskaite said Germany, Britain, Sweden and the Netherlands, all net contributors, demanded further cuts of at least 30 billion euros on top of the 80 billion already trimmed from the European Commission's original spending blueprint.

Playing to Eurosceptical images of Brussels "fat cats", Cameron targeted the roughly 60 billion euros earmarked for EU salaries and benefits in 2014-20 for deep cuts, insisting that European officials endure similar reductions in numbers and pay as national officials in some countries.

He handed Van Rompuy a paper setting out ways to trim the bloc's administration bill by 10 percent, including raising the retirement age for most officials from 63 to 68, and capping pensions at 60 percent of final salary instead of 70 percent.

Van Rompuy ignored them in his draft compromise plan but appeared to open the door at his news conference to taking on board some of the ideas, saying they required careful preparation because they touched on personnel issues.

BITTER DEBATE

Negotiations on the EU's long-term budgets are always rancorous affairs, but the depth of Europe's present debt crisis has made the inevitable arguments over farm subsidies and rebates all the more bitter.

With national budgets being cut across much of the bloc, the EU is contemplating the first real terms decline in spending.

"We can't increase spending in the EU when we are cutting at home," Cameron said.

More than two-thirds of the EU's roughly 130 billion euro annual spending is paid out in subsidies to farmers and investment in motorways, bridges and other public works in poorer southern and eastern European countries.

The current seven-year budget worth 1.034 trillion euros in EU financial commitments for the period 2007-2013 was agreed in 2005, at the height of a credit-fuelled boom in public spending.

The Commission initially demanded a roughly 5 percent increase in spending for 2014-2020, equal to 1.091 trillion euros. But this has already been reduced to 1.01 trillion euros under Van Rompuy's compromise, and many net budget contributors insist the total must dip below the trillion euro mark.

Previous deals have been built around Franco-German pacts to defend generous EU farm subsidies against attack from Britain and other northern states. France receives more from the Common Agricultural Policy than any other country, while Germany is also a major beneficiary.

But the need for overall budget restraint now appears to be a higher priority for Germany than safeguarding farm spending, prompting France to ally itself with Poland and former-communist eastern European states to jointly oppose cuts to the two biggest areas of EU spending.

French President Francois Hollande pressed for proposed cuts in farm subsidies to be restored.

One area where Britain stood alone was in its bid to protect its cherished rebate from any cuts. The annual refund worth 3.5 billion euros last year was first won by Margaret Thatcher in 1984, due to Britain's low lower share of EU farm subsidies.

Paris, Berlin and others want to reform the complex system of rebates that also sees linked payments made to Germany, the Netherlands and Sweden. Hollande also said Paris would keep pushing for a change in the way rebates are calculated so that all countries contributed to their payment.

But EU officials accept that Cameron cannot win the support of Britain's euro-skeptic parliament for any deal that scraps the rebate.

(Additional reporting by Andreas Rinke, Peter Griffiths, Catherine Bremer, Ethan Bilby, John O'Donnell, Justyna Pawlak, Robin Emmott, Robert-Jan Bartunek and Jan Strupczewski; Editing by Paul Taylor)

EU Summit Ends Without Budget Deal

A two-day EU summit ended on Friday with no agreement on the 2014-2020 budget amid bitter divisions over spending cuts. British Prime Minister David Cameron led calls for slashes to the budget while fighting to keep Britain's EU rebate.

By News Wires (text) (AFP)

France 24, November 25, 2012

A European Union summit wound up Friday with "no agreement" sealed for the bloc's next long-term budget, officials from several EU delegations said.

"There is no agreement," one official said.

With the 27 heads of state and government bitterly divided over spending policy, there had been little hope of a deal on a trillion-euro budget for 2014-20 during the two-day summit.

British Prime Minister David Cameron headed a group of austerity-driven nations demanding huge cuts in the next seven-year budget to match belt-tightening measures at home.

Divisions between have and have-not nations on how to spend the EU's billions caused further disagreements.

Talks to settle the bitter disputes that surfaced at the two-day summit will resume in January, Belgium's Foreign Minister Didier Reynders said on his Twitter account.

An EU diplomat said the main obstacle at the summit was Cameron's demand for reductions in the planned [budget,] adding that "the most virulent" countries by his side were Sweden and the Netherlands.

Cameron had vowed to bring down the budget from a proposed 1.047 trillion euros ($1.347 trillion) to 886 billion euros.

UK and France face off over EU budget

The start of an EU summit to settle the bloc's disputed trillion-euro budget was delayed on Thursday as the leaders of Britain and France clashed over increased funding, which UK Prime Minister David Cameron (photo) described as “quite wrong”.

By News Wires (text) (AP)

France 24, November 23, 2012

The leaders of Britain and France staked out starkly different visions of Europe’s future on Thursday, as talks began in Brussels on how much the European Union should be allowed to spend, setting the stage for a long, divisive and possibly inconclusive summit.

While British Prime Minister David Cameron is seeking to keep payments into EU coffers as low as possible, French President François Hollande called for sustained subsidies for farming and development programs for poorer nations.

With each of the 27 nations having the power of veto over the 2014-2020 budget, the summit negotiations could stretch over the weekend, perhaps without result.

Cameron voiced the concerns of several other countries that do not want to see an increase in the bloc’s spending plan at a time when many member states are cutting budgets at home.

“No, I’m not happy at all,” Cameron said about EU President Herman Van Rompuy’s latest offer to cap spending for 2014-2020 at €1 trillion ($1.28 trillion).

‘’Clearly, at a time when we’re making difficult decisions at home over public spending, it would be quite wrong – it is quite wrong – for there to be proposals for this increased extra spending in the EU,” Cameron said.

The EU budget primarily funds programs to help farming and spur growth in the bloc’s less developed, and it amounts to about 1 percent of the EU’s gross domestic product.

France’s Hollande said that was worth fighting for, adding he would be happy to walk away from the meeting if his demands were not met.

‘’No country should have a privileged position,” Hollande retorted. ‘’I come here to find a compromise, not to set an ultimatum.”

The European Commission, the EU’s executive arm, supports more spending, arguing that cross-border initiatives will help create the economic growth and jobs that the bloc of a half-billion people needs, particularly during a financial crisis that has pushed some countries into recession.

The amount of work Van Rompuy has to do to bring the conflicting views closer together was highlighted earlier Thursday as the bilateral meetings preceding the summit overran, forcing the opening discussions to be delayed by 2 ½ hours until about 10:30 p.m.

Calling on all for a compromise, Van Rompuy said “it is necessary and, I am convinced, it is within our reach. So, dear colleagues, let’s get down to business.”

Several leaders were already anticipating the possibility of failure and the need to hold another summit in the new year to negotiate a deal.

“Germany wants to reach a goal, but there might also be the need for yet another stage,” Chancellor Angela Merkel said.

Facing an ever more vocal eurosceptic electorate at home in the U.K., Cameron is under huge pressure to veto any seven-year deal which would make the budget bigger. The U.K. and other countries that contribute more then they receive from the budget – such as the Netherlands, Sweden and, to a certain extent Germany – claim an austerity budget is the only justifiable outcome at a time when almost every member state has to cut its budget to lower debt.

Meanwhile, 15 of the EU’s most financially and economically vulnerable countries have joined forces to oppose any cuts to funds earmarked for economic growth and development. These countries include not only traditionally poorer member states, many in Eastern Europe, but also those hit hardest by the financial crisis, like Greece, Portugal and Spain.

They argue that they need sustained, even increased, help to close the wealth gap on the continent and that EU institutions need the means to implement their jobs and growth policies.

“Certain countries want to make drastic reductions in the budget. That’s a big mistake,” said Elio Di Rupo, Belgium’s prime minister.

With every country having the power of veto, Dutch Prime Minister Mark Rutte fully realized what was coming.

‘’There will be quite a battle to come – the French, the British, southern Europe, eastern Europe, we all have our demands,” Rutte said. ‘’I don’t know whether it will work out.”

Going into the open-ended summit, which might well stretch into Saturday or beyond, Van Rompuy made a first compromise proposal that leaned toward Cameron’s demands. It proposes a cut of between €3 billion ($4 billion) and €24 billion ($31 billion), depending on the accounting criteria, from the €1 trillion proposal.

“With less money, we cannot do the same as before,” Van Rompuy wrote in the invitation letter he sent to the 27 leaders.

If the summit fails to find a compromise, the issue could spill over into a new meeting next month, or into next year. There is no set deadline for a deal but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs.

‘’In talks with colleagues, I had one message. If this doesn’t work out at once, let’s be sure that the mood is not that dark that we have to spend months on patching up personal relationships,” Rutte said.

If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 percent increase accounting for inflation.