Budget clash leaves EU summit close to failure

BRUSSELS – The prospect of failure hangs over a European Union leaders’ summit intended to lay out the 27-country bloc’s long-term spending plans.

While heavyweights like Britain and France are pulling in opposite directions, smaller members are threatening to veto a deal to make themselves heard.

Negotiators will try to navigate the myriad demands on the second day of the meeting Friday. A tense first session left many observers predicting leaders will need more time to bridge their differences over the bloc’s spending priorities for the years to come.

“I have my doubts that we will come to an agreement,” German Chancellor Angela Merkel said early Friday as she left the first day of the talks, which could stretch into Saturday.

The EU budget primarily funds programs to help farming and spur growth in the bloc’s less developed countries. In financial terms, it amounts to only about 1 per cent of the EU’s gross domestic product, but the real significance of the budget is that it lays bare the balance of power between the bloc’s members.

The bloc is divided along several lines. The most notable is between richer countries that want to reduce their contributions to the common budget at a time of economic malaise, and poorer ones that rely on EU money for development aid and economic investment.

British Prime Minister David Cameron is the most vocal leader demanding restraint, while French President Francois Hollande wants the budget to keep paying subsidies for farming and development programs for poorer nations.

But Van Rompuy’s revised proposal late Thursday did not yield further to Cameron’s demands for cuts, keeping to the same total.

Cameron said Friday it was unreasonable to see an increase in the bloc’s spending plan for 2014-2020 at a time when many member states are cutting budgets at home.

“I don’t think there’s been enough progress so far,” Cameron said. “I mean, there really is a problem in terms of there hasn’t been the progress in cutting the proposals for additional spending. It isn’t a time for tinkering. It isn’t a time for moving money from one part of the budget to another. You know, we need unaffordable spending cut. That’s what’s happening at home; that’s what needs to happen here.”

Hollande and Merkel said another summit meeting might be necessary.

“We should not consider that if we don’t get there tomorrow or the day after, all would be lost,” Hollande said.

The amount of work Van Rompuy has to do to bring the conflicting views closer together was highlighted Thursday as the bilateral meetings preceding the summit overran, forcing the opening discussions to be delayed by 2 1/2 hours.

Bilateral talks resumed early Friday, with a first joint session set for noon to see if a compromise is within reach.

Britain is backed by other net contributors to the EU budget, such as the Netherlands, Sweden and, to a certain extent Germany. Public sentiment toward EU institutions in these countries has soured as the EU institutions — and its common currency, the euro — are considered largely responsible for the financial crisis afflicting the continent.

Meanwhile, 15 of the EU’s most financially and economically vulnerable countries have joined forces to oppose any cuts to funds earmarked for economic growth and development. These countries include not only traditionally poorer member states, many in Eastern Europe, but also those hit hardest by the financial crisis, like Greece, Portugal and Spain.

They argue that they need sustained, even increased, help to close the wealth gap on the continent and that EU institutions need the means to implement their jobs and growth policies.

There is no set deadline for a deal, but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs.

“In talks with colleagues, I had one message. If this doesn’t work out at once, let’s be sure that the mood is not that dark that we have to spend months on patching up personal relationships,” Dutch Prime Minister Mark Rutte said.

If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 per cent increase accounting for inflation.


Raf Casert contributed from Brussels, Juergen Baetz from Berlin. Don Melvin can be reached at .