EU Budget Battle Ends As 'Givers' and 'Receivers' Can't See Eye-to-Eye

on November 23 2012 3:54 PM
European Council President Van Rompuy
European Council President Herman Van Rompuy gestures during a news conference after talks with German Chancellor Angela Merkel (who is not pictured) at the Chancellery in Berlin on June 10, 2010. REUTERS

European Union budget talks are done for now after the U.K. secured Germany's support for further cuts to the next seven-year budget, the latest proposal for which stands at €973 billion ($1.26 trillion).

The collapse of the talks means that another summit must be organized, probably during early next year. The negotiations are pitting net contributors to the budget, such as the U.K. and Germany, against net recipients, including France and Italy. Relatively under-developed Eastern European state members, led by Poland, want to see increases that help their development be more on par with that of their Western compatriots. At least 11 countries, including Italy and Portugal, have threatened to veto the budget if it doesn’t meet their expectations.

The talks come as the continent grapples with the massive eurozone sovereign debt crisis that has forced states into taking drastic austerity measures.  

The summit was expected to continue for another day, but European Council President Herman van Rompuy ended them on Friday after overnight debates failed to settle divisions.

Speaking after the failed summit in Brussels, a visibly frustrated U.K. Prime Minister David Cameron appeared to be emboldened by his country’s austerity stance.

“The proposal on the table was not one I was prepared to accept -- nor a number of other countries, either” Cameron said at a press conference on Friday. “Our position is very simple: We cannot increase spending in the EU when we are cutting it at home.”

Van Rompuy responded on Friday by saying the proposed amount is lower than the previous seven-year budget, which is a first for the bloc.

“The next seven years will be crucial to put Europe back on the path of recovery and growth. So we must get it right," he said, according to CNN.

Cameron was emboldened Friday after German Chancellor Angela Merkel joined the U.K. in opposing French President Francois Hollande’s demand that the U.K. reduce the amount of its rebate, siding with the Brits on their call for further cuts to EU bureaucracy.

"We have had an exchange of views and [have] given our president, Herman Van Rompuy, a mandate to progress on the work in order to find a consensus in the coming weeks," Merkel said on Friday, according to Reuters.

The U.K. has taken the lead in calling for spending freezes and eliminating any prospect of increased contributions to the budget. It also is standing firm on the annual €4 billion ($5.18 billion) agricultural subsidies rebate it receives from countries that draw the most from the Common Agricultural Policy, which makes up roughly half of the union-wide budget. France contributed about a fourth of that rebate and wants the rebate lowered.

Among the U.K.’s demands is a 10 percent reduction in payroll for all EU institutions. It also wants to see a much smaller increase to the Connecting Europe program aimed at integrating transport, energy grids and high-speed digital connectivity across the region, and much steeper cuts to administrative expenses, in addition to payroll reductions. It also insists on a freeze on spending and assurances the next budget won’t ask more from European taxpayers.

Talks will likely resume early next year after the EU meets in December to discuss a European banking union.

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