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Britain faces off against EU over budget payment

27 October 2014, 19:44 CET
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Britain faces off against EU over budget payment

David Cameron - Photo EU Council

(LONDON) - Britain headed for a showdown with the European Commission on Monday as Prime Minister David Cameron brushed off an EU payment demand despite warnings he must pay up or face fines.

Under pressure from eurosceptics within his own Conservative Party ranks, Cameron told parliament that the amount requested and the short December 1 deadline were "unacceptable".

"It is British taxpayers' money, it is not small change, it is a vast sum," he said to cheers from the Conservatives, who face a challenge from the anti-EU UK Independence Party.

"We will be challenging this in every way possible," he said.

Cameron said Britain was not ruling out a payment altogether but emphasised it would be "nowhere near" the requested sum.

He also said that the amount was a provisional estimate that was only be made definitive in the middle of next year.

"There is no pressing need for the money to be paid," he said.

Jacek Dominik, the interim EU budget commissioner, earlier Monday said that Britain must pay an extra 2.1 billion euros ($2.66 billion) to the European Union budget or face fines.

"There will be a moment when the Commission will start imposing ... fines on the amounts that are due," Dominik said.

- 'A Pandora's box' -

Cameron had already ruled out making the payment at a European Union leaders summit on Friday, claiming he had been told about the amount only at the last minute.

But Dominik said that Britain should not have been surprised since the budget-adjusting process was well established and there was "no signal that they had a problem with this figure".

Asked if there could be a political solution with the British premier, Dominik said he did not think so.

Calculating the budget was based on a formula agreed by all EU member states which would require new legislation to change.

Going down that track would be to "open up a Pandora's box," he said.

At the same time, he said, Britain could not pick and choose which bits of EU laws it wanted to live by.

On top of its regular annual budget rebate, London was due to get an additional 500 million euros next year, Dominik said.

Cameron has pledged to try to renegotiate Britain's relationship with the EU if he remains prime minister after a general election in May 2015, then hold an in-or-out referendum by the end of 2017 on the outcome.

"For those of us who want to argue that the EU is capable of reform, this was not a good development," Cameron said.

- Fraught budget process -

The EU budget, currently running at around 135 billion euros per year, is based on the principle that the bigger the member state is, the more it contributes.

Accordingly, Germany pays most, followed by France and Italy along with Britain, which also gets a special rebate won by late prime minister Margaret Thatcher in 1984.

To ensure that the fraught budget process is fair, each year the EU reviews the economic performance of all 28 member states, adjusting their contributions up or down as a result.

In recent years, authorities broadened the review to include new forms of economic activity, some of them illegal such as prostitution and drug dealing.

The result for 2013, the year in question, was a much larger-than-usual range of adjustments. As well as Britain, the Netherlands has to pay an extra 650 million euros.

Especially galling for London is that France, with an economy which has stalled, will get a rebate of some one billion euros while powerhouse Germany gets back 780 million euros.

France has been having its own problems with the EU, however, because of a national budget deficit expected to breach the European Union's 3.0 percent ceiling next year.

France announced "new measures" to its budget on Monday to reduce its deficit by 3.6 billion euros ($4.6 billion).

Italy also pledged additional measures to reduce its structural deficit by 0.3 percent of GDP in 2015, after it was warned by the European Commission it risked breaching EU rules.


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