Deadlock in Brussels: EU Budget Summit Heading toward Failure

By  in Brussels

Despite hours of talks in Brussels on Thursday night, European Union leaders made little progress toward agreement on the bloc's budget for the years 2014 to 2020. Britain and other countries have remained steadfast in their demands for cuts. A second summit looks to be the only likely outcome.

European Union leaders were unable to reach agreement on Thursday night in Brussels. Zoom
REUTERS

European Union leaders were unable to reach agreement on Thursday night in Brussels.

European Parliament President Martin Schulz began losing his temper as time wore on. It is "extremely irresponsible," he told the 27 European Union heads of state and government gathered in Brussels, when EU member states deny the bloc necessary funding. The €1.091 trillion budget proposed by the European Commission, he said, is commensurate because it will also stimulate growth.

Schulz spoke just before midnight as the European Union budget summit, aimed at agreeing on bloc funding for the seven-year period between 2014 and 2020, finally got underway after a three-hour delay. His plea had little effect, though. British Prime Minister David Cameron, his Dutch counterpart Mark Rutte and Swedish Premier Fredrik Reinfeldt continued to demand billions in cuts. German Chancellor Angela Merkel likewise found the proposed budget to be too large.

Every seven years, European Union leaders must come together to agree on a new spending plan, and this year's Commission proposal has been particularly controversial. At a time when many EU countries have tightened their belts significantly, an increase to the EU budget, slight though it may be, has not proven popular among net contributors. They would like to see the budget cut to between €890 billion (the British target) and €960 billion (as Germany has proposed). But the 17 net recipient countries support the higher Commission proposal.

Progress toward consensus was limited on Thursday night. Immediately prior to the summit, European Council President Herman Van Rompuy had proposed €81 billion in cuts, for a total of €1.01 trillion. But the reduction was not enough for net contributors. German government sources said that Berlin wanted to see further "moderate cuts." Cameron, for his part, presented a whole laundry list of difficult demands, including an increase of the retirement age for Eurocrats to 68 in addition to a 10 percent pay cut and pension reductions.

An endless series of bilateral meetings prior to the summit were unable to bridge the differences between the two camps. At the end of the night, Merkel indicated that the positions were still radically divergent and voiced doubt that agreement will be reached during this summit. "In all probability," she said, "there will be a second stage."

French President François Hollande was also skeptical. It is probable that no deal will be reached, he said. "That's what everyone thinks," he said at a late-night press conference.

An Attempt at Compromise

After 15 hours of preliminary, bilateral talks, Van Rompuy presented a slightly altered proposal. He reduced the cuts to agricultural subsidies from €25 billion to €17 billion, and the reductions to the structural and cohesion funds from €29 billion to €18 billion. Both were a result of pressure from France and Poland. In exchange, he suggested heavier cuts to infrastructure and research spending. But the revised proposal still included some €81 billion in cuts against the original Commission proposal. At that point, net contributors pushed for a break so they could sleep on it.

The main conflict is between the UK and France. The gulf between the two countries seems to be so wide that neither Hollande nor Cameron saw fit to hold a bilateral discussion. "We know our positions," Hollande said. As for Cameron's demand that EU officials be the next victims of cuts, the French president said there would always be "extreme proposals," he said. Next, he said, will be the proposal that Strasbourg be abandoned as the second seat of European Parliament, an idea that Hollande said was "unacceptable."

But the Socialist politician did meet with Merkel, apparently coming to an agreement on agricultural subsidies. The two leaders decided that Van Rompuy's original spending cut proposals for both these and the cohesion funds should be limited, Hollande said. "That was a first positive step," he added.

Meanwhile Merkel is taking on the role of intermediary between net contributors and the beneficiary countries. It seems unlikely, however, that net contributors will be able to push through cuts beyond those included in the Van Rompuy proposal. A compromise that comes to less than €1.01 trillion would have no chance of being passed by European Parliament, warned the body's President Schulz -- a warning that must be taken seriously given parliament's veto over budgetary matters.

Still, EU leaders made clear on Thursday night just how little respect they have for the European Parliament. Recently, EU parliamentarians had rejected the nomination of Luxembourgian Yves Mersch to the European Central Bank's governing council, insisting that a woman be appointed instead. The 27 heads of state and government, however, ignored the appeal and installed Mersch anyway.

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