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EU leaders look for ways to rescue budget summit

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(Globalpost/GlobalPost)

Europe's leaders struggled on Monday to rescue summit talks on the EU's trillion-euro budget, with Italy and Germany on a collision course over cuts demanded by Britain, and France warning of a breakdown in negotiations.

"The negotiations are very difficult ... the conditions are, at this moment, not yet in place," French President Francois Hollande warned as European Union leaders prepare to meet in Brussels on Thursday and Friday.

Hollande spoke on Sunday after tricky talks with Italian Prime Minister Mario Monti in Paris, a day after German Chancellor Angela Merkel said a bid to broker a deal on the 27-state EU's spending plans for 2014-20 would be "very difficult".

Monti, who is also campaigning in an Italian general election, said: "These are all very multi-layered and complex topics."

A special summit on the issue collapsed in November with leaders unable to resolve differences on a proposal by EU President Herman Van Rompuy for a reduced budget of 973 billion euros ($1.33 billion), just over one percent of EU gross domestic product.

British Prime Minister David Cameron is seeking to bring the budget down to 886 billion euros.

The main thrust of the arguments, though, concerns how spending cuts should be split across different European policies such as farming support or grants to poorer regions.

More than a dozen countries which are net beneficiaries of the budget, including powerful voices such as Poland, are themselves split on priorities.

Merkel and Hollande meet on Wednesday, after Merkel hosted Monti on Friday. Later on Monday, the German Chancellor also meets the Spanish Prime Minister Mariano Rajoy, whose government is currently embroiled in a corruption scandal.

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For Hollande, the problem is how to square a conception of EU solidarity and a need to foster growth through big-ticket, cross-border investment in such areas as energy, transportation and digital infrastructure networks, with national political priorities.

Van Rompuy, European Commission head Jose Manuel Barroso, European Parliament head Martin Schulz and Enda Kenny, the Irish Taoiseach or prime minister currently in the EU's rotating presidency chair, also meet on Monday to try and find a way through the maze. The Parliament can block any deal it considers unsatisfactory.

And it may well do so.

Leaders need to be unanimous on any compromise, but Schulz has warned of a likely "no" vote if the leaders agree a budget far below the initial ambitious proposals submitted by the Commission.

"If there is no deal, we can live with an annual budget," said Schulz.

Under this fallback system, which critics say undermines long-term projects and planning, the annual EU budget is automatically renewed at the previous year's level plus inflation.

Malcontents all round appear ready to use that as a way to maintain their negotiating stances.

Ministers for European affairs were meeting in Brussels on Monday, again trying to bridge the impasse.

But the positioning continues with Barroso -- at a time of industrial action signalled by unions representing tens of thousands of EU civil servants facing job losses -- due to outline his views in the Parliament in Strasbourg on Wednesday.

"It is important we get an agreement this week between member states so that the process can then move to the European Parliament," Barroso said on Monday after talks with Romanian Prime Minister Victor Ponta.

Barroso said the budget "cannot only be about cuts, but about how the money can best be spent to provide the employment and improve living standards of all citizens across all the EU."

Meantime, critics are piling into the Commission -- the EU institution with by far the biggest payroll -- to justify wages and perks that often outweigh conditions for national civil servants and private-sector remuneration.

Sources at both the Commission and the Parliament say EU leaders will be looking to trim a further 20 billion to 25 billion euros at the February 7-8 summit.

A source familiar with the budget negotiations told AFP that the budget row "is killing all our ambitions" for investment towards wider economic growth.

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http://www.globalpost.com/dispatch/news/afp/130204/eu-leaders-look-for-ways-to-rescue-budget-summit