EU members agree Brussels draft as basis for budget talks

(SOPOT) - EU nations agreed Friday to use controversial plans from Brussels as the basis for talks on the bloc's next budget, though austerity-focused governments have blasted proposed hikes.

"The vast majority of member states -- 24 out of 27 --- accepted our proposals as a good starting point for negotiations," EU budget chief Janusz Lewandowski told reporters after talks called by Poland, which currently holds the bloc's rotating presidency.

"They consider the budget plan as something that can be amended, but not turned upside down," he said following the informal, closed-door meeting. "We've cleared the most important first hurdle," Lewandowski said.

Lewandowski declined to identify the holdouts.

Sources said they were Britain; Sweden, which wants less farm spending and more on research; and Hungary, which fears losing a slice of funds that help poorer economies catch up with their richer neighbours.

The Sopot talks marked only a first step in a gruelling process that will run into 2012, but Lewandowski said the non-binding decision was crucial.

In the kinder economic climate of 2004, governments shot down an initial budget plan, he noted.

The European Commission -- the EU's Brussels-based executive body -- unveiled a draft budget for 2014-2020 in June.

It faced a hail of fire for planning a five-percent rise from the previous seven-year cycle, increasing spending to 1,083 billion euros ($1,552 billion).

David Lidington, Britain's EU affairs minister, said such a rise could not be justified in hard economic times.

London wants "a real terms freeze, at most," he said.

"I actually think that a real terms freeze is lot more modest than what a lot of European countries are implementing domestically," he underlined.

Despite not rejecting the proposal outright Friday, fellow "big three" players France and Germany also insisted Brussels be frugal.

"In the current climate, we need to be coherent about policies on the domestic front and those outside," said France's EU minister Jean Leonetti, while Germany's Werner Hoyer called for "a freeze, and not an increase".

Brussels' plan resets EU priorities, for example by reducing farm funds in favour of infrastructure investment and a greener economy.

Poland and other ex-communist nations that joined the EU in its 2004 "big bang" expansion from 15 members want a level playing field for their farmers, who they argue do not get a fair share of funds for the sector.

The draft focuses strongly on bolstering cross-border energy, telecoms and transport grids, to streamline integration in the world's biggest market.

"We have to realise that the budget is the investment budget of the EU. That's an objective fact," Poland's EU minister Mikolaj Dowgielewicz said.

The plan foresees an EU sales tax and a financial transactions tax -- backed by France but opposed by Britain -- to help Brussels raise its own funds and reduce the EU's direct dependence on member states for its budget.

Brussels says the sales levy, representing another one or two percentage points of national value-added tax, and the transactions tax, worth an annual 30 billion euros, would bring in 40 percent of EU revenue.

It also aims to reform "rebates", or annual paybacks to certain member states who claim their EU contributions are excessive -- notably a huge refund for Britain negotiated in the 1980s by Margaret Thatcher.

"It's fully justified, we shall protect it. Our finance minister has said that will be our position on the final day of negotiations as it is at the start," insisted Lidington.