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EU leaders walk toxic trillion-euro budget tightrope

22 November 2012, 18:11 CET
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EU leaders walk toxic trillion-euro budget tightrope

Cameron - Van Rompuy - Barroso - Photo EU Council

(BRUSSELS) - Brussels hunkered down for a gruelling European Union summit Thursday to clinch a trillion-euro budget deal that is bitterly dividing a 27-nation bloc, already mired in economic crisis.

Police sirens wailed as leaders from across the continent sped past barbed-wire barriers into the city's European district for two days of talks aimed at finding a seemingly impossible compromise on the 2014-2020 budget.

Britain was the potential chief spoiler at the summit, with Prime Minister David Cameron threatening to wield his veto unless spending is frozen in real terms, arguing that at a time of austerity at home the EU must also make cuts.

Cameron was the first to arrive at the European Council building for one of the individual "confessionals" which EU president Herman Van Rompuy will hold with each of the EU's 27 leaders ahead of the official evening opening of the summit.

He was in fighting mood as he went in, telling reporters: "We're going to be negotiating very hard to get a good deal for the British taxpayers."

The Financial Times however reported on Thursday that Cameron, under constant pressure from eurosceptics in his Tory party to battle supposed European meddling and bureaucracy, was prepared to accept a 940-billion-euro spending ceiling.

He had initially vowed to settle only for a real-terms freeze from 2011 levels -- which Britain believes would be equivalent to 886 billion euros -- but could still claim he had won a budget cut if the new plan proceeds, the paper said.

EU net contributor nations -- Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden -- have banded together to demand spending cuts, but are far from being on the same page on what should be cut or by how much.

Swedish Prime Minister Fredrik Reinfeldt stuck to his guns as he arrived for his "confessional" with Van Rompuy, telling reporters: "We want the overall level to come down and we want a more modern budget."

Much of Europe is in or dangerously close to recession and austerity-driven nations are demanding huge cuts in EU spending to match belt-tightening at home, raising the ire of cash-strapped nations to the east and south who benefit from the bloc's development funds.

Those so-called "cohesion funds" -- billions of euros outlayed each year to the EU's newer and poorer entrants so they can make up the economic lag with richer neighbours -- are central to the battle at the Brussels summit.

They will be defended tooth and nail by the 15 "Friends of Cohesion" nations -- led by Poland and Portugal -- who are net beneficiaries of the EU budget.

The cohesion funds are the second-biggest budget item after the Common Agricultural Policy (CAP), the farm and fishing subsidies which are another bone of contention.

France is by far the biggest CAP beneficiary, and French President Francois Hollande has vowed to fight to keep his country's prized agricultural subsidies.

He this week lashed out at countries which defended budget rebates and discounts, the third hot-button issue that could send the budget summit off the rails.

He did not name any specific countries, but Britain in particular cherishes its budget rebate, which then prime minister Margaret Thatcher obtained in 1984 on the grounds that London was paying too much into the bloc's coffers.

The British rebate was worth 3.6 billion euros last year, and Cameron vowed on Thursday when he arrived for the Brussels summit, which may continue long into the weekend if no deal is found, that he had no plans to give it up.

Germany, the Netherlands, Sweden and Austria are also demanding to keep their rebates and Denmark is seeking one too.

German Chancellor Angela Merkel sad Wednesday she did not "know if we will have a definitive deal" by Friday. "If necessary we will have to meet again at the beginning of next year."

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