Govts reject EU budget compromise

Oct 30 2012, 21:54 IST
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Governments reject latest EU budget compromise (Reuters) Governments reject latest EU budget compromise (Reuters)
SummaryThe document will form the basis of negotiations to reach a deal on the seven-year budget.

A compromise proposal on the European Union's long-term budget, cutting more than 50 billion euros ($64.5 billion) from the original blueprint, ran into a crossfire of criticism on Tuesday from governments on both sides of the spending debate.

The plan by the EU's Cypriot presidency, sent to capitals late on Monday, recommended the deepest cuts to infrastructure spending in the poorest member states to reduce the total bill, with a less drastic reduction in farm subsidies.

The document will form the basis of negotiations to reach a deal on the seven-year budget for 2014-2020 in time for a summit of EU leaders on Nov. 22-23.

But it angered both richer Western states keen to minimise their contributions as they struggle to reduce national debt, and Eastern newcomers who rely heavily on EU funds for their future economic development.

In times of austerity, the EU budget must not grow. We need to cut three or four times as much as in this proposal to stabilise member states' contributions, said Swedish Minister for EU Affairs Birgitta Ohlsson. Stockholm is a net contributor.

No deal will be possible on the basis of cuts of only 50 billion euro, she added.

Sweden, Germany and Britain have demanded cuts of 100-200 billion euros to the European Commission's proposed 1 trillion euro total, slightly more than 1 percent of the 27-nation bloc's gross domestic product. By contrast national government spending accounts for between 40 and 56 percent of member states' GDP.

A diplomat from Poland, the biggest net recipient of EU funds, criticised Cyprus for concentrating solely on wielding the axe.

The presidency proposals seems to be excessively focused on cuts, which creates an impression of a strategy to survive the crisis, rather than to emerge stronger from it, said the diplomat, who declined to be named.

Cyprus, which holds the bloc's rotating six-month presidency, said the cuts outlined so far were just a start and deeper reductions would be needed to reach a final deal.

Further reductions will require even bigger trade-offs and the need to prioritise between policies and programmes, it said.

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The Cypriot compromise cuts the EU's seven-year regional development budget by about 12.5 billion euros compared with the Commission's original plan.

By contrast, spending on agricultural subsidies, of which France, Italy and Germany are the biggest beneficiaries, would only fall by about 5 billion euros under the compromise. Direct payments to EU farmers would total more than 277 billion euros over seven years.

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