EU leaders tackle tough budget

7th February 2013, Comments 0 comments

EU leaders head into difficult talks on the bloc's 2014-20 budget Thursday, with key players France and Germany insisting they both want a deal amid sharp differences over cuts and spending priorities.

A special November summit ended acrimoniously and this time most expect a compromise but there is no certainty other than that the negotiations will be tough.

An agreement depends on finding a balance between British and German calls for cuts, and French and Italian demands to ring-fence money for investment in areas that can generate jobs and growth in a faltering economy.

Late Wednesday, French President Francois Hollande hosted Chancellor Angela Merkel for what a German spokesperson described as "a short but intense meeting ... to see what kind of agreement could be made."

Britain meanwhile warned that a "bigger and bigger EU budget is not the answer to the EU's challenges.

"We need spending that is affordable," Britain's permanent representative to the EU said in a tweeted message.

The European Commission, the EU's executive arm, initially wanted a 5.0 percent increase in member state commitments to 1.04 trillion ($1.4 trillion) euros for the 2014-20 budget.

EU President Herman Van Rompuy cut that back to 973 billion euros for the November summit but now it appears he is ready to go further in an effort to avoid another embarrassing failure.

EU diplomatic sources said Van Rompuy could reduce this figure -- the maximum amount member states agree to contribute to the budget -- to around 957 billion euros.

At the same time, the total money to be actually spent will be reduced by around 30 billion euros to 905 billion euros, perhaps enough to satisfy Britain and other hawks, the sources said.

Spending at around 900 billion euros would be about one percent of the EU's total Gross Domestic Product, modest on that basis but crucial at the margins for many member states.

A new element in the equation is that the EU parliament now has to approve any budget deal and assembly head Martin Schulz has said lawmakers are ready to throw out any agreement they think falls short.

In a possible foretaste of things to come, several leading MEPs have warned against "suicidal" or "fraudulent" fixes which undercut growth and jobs.

Typically, spending in the budget is fixed below the maximum contribution figure so as to allow some leeway and based on experience that some programmes are not implemented.

Most of the budget goes to the Common Agricultural Policy to support farmers and Cohesion Funds, the money spent to help new members invest in the social and economic infrastructure needed to catch up with their more-established partners.

Hollande, elected last year on a promise to boost growth, concedes that the EU has to make savings at a time when national budgets are under pressure but insists that more austerity will only hurt the economy more.

British Premier David Cameron, under pressure from growing euro-sceptic opinion at home, says growth comes when the public finances are balanced and healthy, allowing the economy to grow without hindrance.

Germany takes a similar position but stresses its commitment to the overall EU project while all member states in turn have specific interests they want protected and promoted, leading to close quarter horse trading.

Van Rompuy sounded positive Wednesday of getting a deal.

"I am confident that with some adaptations, the proposal I made on 22 November can constitute the basis for a deal," he said.

The start of Thursday's talks were delayed for several hours to to allow more time for discussions on a compromise.

The opening of the summit was pushed back from 1400 to 1630 GMT "because we needed more time to work on the compromise proposal," said the official who asked not to be named.

Friday's sessions set are to cover relations with the EU's north African neighbours and progress on free trade deals with the United States, Japan and others.


© 2013 AFP

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