Budget clash leaves EU summit close to failure

Written by Associated Press | Brussels | Updated: Nov 24 2012, 08:02am hrs
The prospect of failure loomed over a European Union leaders summit intended to lay out the 27-country blocs long-term spending plans. While heavyweights like Britain and France are pulling in opposite directions, smaller members, too, 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 day left many observers predicting leaders will need more time to bridge their differences over the blocs 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 programmes to help farming and spur growth in the blocs less developed countries. In financial terms, it amounts to only about 1% of the EUs gross domestic product, but the real significance of the budget is that it lays bare the balance of power between the blocs members.

The bloc is divided, notably 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 the revised proposal of European Council president Herman Van Rompuy late Thursday didnt yield further to Camerons demands for cuts. The Council is the gathering of the 27 EU heads of state and government. Cameron said Friday it was unreasonable to increase the blocs spending for 2014-2020 when many member states are cutting their national budgets.

I don't think theres been enough progress so far, Cameron said. I mean, there really is a problem in terms of there hasnt been the progress in cutting the proposals for additional spending. It isnt a time for tinkering. It isnt a time for moving money from one part of the budget to another. You know, we need unaffordable spending cut. Thats whats happening at home; thats what needs to happen here. Belgian prime minister Elio Di Rupo was also displeased with Van Rompuy's proposal , but for precisely the opposite reason.

The big problem, the basic problem is that there is not enough money, Di Rupo said of the plan.

Standard & Poors confirms Frances AA+ rating, warns on deficit

Standard & Poor's confirmed Frances long-term rating of AA+ and negative outlook on Friday but warned the government was likely to miss its public deficit target next year. Days after rival Moodys stripped France of its Aaa rating, S&P applauded the governments plans to help restore the countrys competitiveness largely with tax credits to companies. However, S&P warned that the public deficit was set to miss the government's target of 3% of national output next year, estimating a budget shortfall of 3.5%. The affirmation reflects our opinion that the French government remains committed to budgetary and structural reforms that would build on the measures it has proposed so far and improve the country's growth potential, it said in a statement.Reuters