Rebels advance in big-bucks battle with EU 'technocrats'

(BRUSSELS) - Poorer European nations say they are winning the battle against Brussels technocrats for control of hundreds of billions of euros in vital EU grants due to be paid out in the next decade.

Ex-Communist Poland and cash-strapped Italy are backing a group of 13 mainly former communist states demanding domestic control over EU infrastructure investment aimed at giving Europe's poorer member states a leg up.

Ensuring a majority of the 27 European Union states will resist plans for unelected Brussels officials to dictate how EU money is spent on the ground, Poland will formally join this new eastern 'bloc' in January.

From Bulgaria to Spain, the stand-off -- at the heart of tough negotiations on 2014-2020 spending priorities -- will determine how the bulk of the EU's estimated 1.0-trillion-euro ($1.36 trillion) spending is divvied up.

Such spending in 'cohesion' funds accounts for 40 percent of the EU's annual 130-billion-euro budget.

Maintaining this juggernaut effectively means the status quo for another 40-percent chunk, directed at agriculture.

"It's much cheaper to do this right, the prevention side of the coin if you like, than to have to come back in later with bailouts," said a diplomat from one of the rebel member states.

"It's what they do in the United States and in China, and it should stay that way in the EU too," he added.

The group's demands include same-level funding overall for 2014-2020 after the current seven-year cycle.

In addition to resisting any tightening of spending, which they say will only "increase existing disparities," the group opposes moves to centralise decisions over what projects should benefit.

The European Commission, fighting for influence as the eurozone coalesces around a core of its stronger economies, wants strategic control of major investments in energy, transport and telecommunications across the bloc of half a billion people.

The EU executive has frequently criticised past decisions on spending and even clawed back monies from states citing corruption or misuse, although it admits fraud is on the decline.

The 13 "Friends of Cohesion" presented formal demands to fellow EU foreign and European ministers in Brussels this week, on the back of a mini-summit held in Hungary.

The group so far comprises Bulgaria, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Portugal, Romania, Slovakia, Slovenia and Spain.

Britain, France and Germany are leading a rival drive to suppress all new EU spending -- with support for the big three from Ireland, a massive beneficiary of such EU funding for decades, a particular "sore point," the group says.

However, fresh from being forced to accept EU and IMF public-finance surveillance, "Italy also now supports our demands," said a diplomat with one of the 13 who took part in the talks.

"Rome backs their position without necessarily needing to join the group formally," said an EU source in Brussels directly involved in piloting negotiations on spending priorities from 2014-2020.

"Poland already backed them, it just had to remain officially neutral until passing on the EU's (rotating) chair" in six weeks' time, another source added.

An Italian government source confirmed that Rome, while pursuing savings as a major net contributor to the EU's budget, views cohesion funding as the bedrock of solidarity.

As negotiations wrap up on the 2012 budget, dominated by rows over an above-inflation rise while member states are faced with tough austerity cuts, EU governments now begin the hard bargaining over the bigger spending picture.

Some want to choose their own priorities, for example on underdeveloped transport networks, and override new rules stopping capital regions in former Soviet states accessing grants.

"It's just dumb to spend on education if you don't even have a decent road to get to schools or colleges," said one of the eastern EU diplomats.