Battle over EU budget set to turn ugly

Negotiations over the European Union budget looked set to turn ugly Wednesday as a drive to ramp up 2013 funding ran into a push to impose a decade of austerity on Brussels. The European Commission is expected to call at 1100 GMT for a budget next year of 138 billion euros ($182 billion), according to EU sources. That would mean an increase of 9.0 billion euros, although officials said the final figure would be subject to last-minute talks. Diplomats warned that several governments including Britain, France and Germany already find a 6.8-percent rise "unacceptable" at a time that national governments are forced to impose austerity. The EU budget is always chaotic to negotiate: a big bloc led by France insists spending on agriculture is sacrosanct; while another led by Poland maintains so-called "cohesion" funding, or investment in poorer region, must be kept high. Between them, these two primary EU policies account for 80 percent of bloc spending. After bruising battles amid tough spending cuts domestically for most member states, the EU's budget for 2012 was agreed at 129 billion -- and in February, the EU executive sought only 131.67 billion for 2013. The Commission says the extra money now demanded next year is needed to settle unpaid bills from its seven-year budgetary cycle, drawing to a close with 2013. Diplomats say the "substantial" jump is a response to a push by bigger member states who want to slash 100 billion euros from EU spending during the 2014-2020 budgetary cycle. At the same time, poorer eastern EU countries that normally benefit largely from annual grants aimed at levelling out facilities across the continent, are fighting back to maintain levels of investment. For these countries, according to a joint statement issued during talks in Luxembourg on Tuesday, "we ought to focus on those instruments that promote growth, jobs and investment." Countries among this group argue that deep cuts going forward would only exacerbate the traditional wealth gap among old and new EU states. "2013 is a test-case for the rest of the decade," said a diplomat caught in the middle. "France has been hawkish so far," the diplomat said, referring to the country's demands on budget cuts. "Francois Hollande could undo that a bit were he to win the decisive round in the presidential election, but I'm not so sure he would be able to change track," this negotiator added. In the first skirmishes earlier in the spring, before a Commission forecast of an earlier-than-anticipated pick-up in the economy next year, EU budget commissioner Janusz Lewandowski was working off projections based on 2.0-percent annual inflation. Already on that basis the 129-billion-euro 2012 budget would translate into 142.5 billion in 2017, producing an overall outlay of more than a trillion euros between now and the end of the decade.