EU states set down markers for budget bunfight

Just a month ahead of what promises to be a very difficult summit on the EU's 2014-20 budget, leaders are trading threats and blandishments, seeking advantage where they can to trim their bill. The man in the middle, European Union president Herman Van Rompuy called this week for the 27 member states to be ready to compromise but with Britain and Denmark threatening a veto, that seems a lot to hope for just yet. "I hope we can reach an accord in November," Van Rompuy said. "For that, we need something without which nothing is possible -- a sense of compromise, alongside the political will to find an accord. If there is no willingness, then we will never get there," he said. In July, the European Commission proposed a budget of 1.03 trillion euros ($1.33 trillion), up 5.0 percent on the 2007-13 package, sparking howls of protest from the seven major contributor states and demands for a cut of 100 billion euros or more. Germany, France and Britain especially insist that with government budgets under pressure from all sides, the EU cannot expect to get away with such a large increase in spending. "We can't have EU spending going up and up," British Prime Minister David Cameron said at the October 15-16 EU summit, threatening to veto any November accord which failed on that score. Danish Prime Minister Helle Thorning-Schmidt took a similar line Thursday, saying she would veto a budget which did not give Denmark a one billion kroner (134 million euros, $174 million) rebate. "Our key message to the other countries and what we are fighting for, is that we have to have a discount and that we do not wish to pay other rich countries' rebates," Thorning-Schmidt said, without naming her targets. Denmark currently has no rebate on its EU budget contribution -- but Britain does and will jealously guard it, as Cameron has stressed time and time again. Germany, the Netherlands, Sweden and Austria have also all negotiated rebates of various kinds, arguing that they are paying much more than other countries into the EU and not getting enough back in return. The European Parliament has got in on the act too. "If Cameron can do it, then so can we," said Hannes Swoboda, head of the Socialist group in the parliament, which has its own power of veto over the budget under the EU constitution. Highlighting the potential for strife, the EU parliament on Tuesday rejected cuts demanded by some member states in the 2013 EU budget, aiming to protect popular programmes against shortfalls which disrupted them in 2012. "To boost growth and jobs, parliament reversed (cuts) ... in areas that MEPs believe are vital to boost the economy, such as research, entrepreneurship and employment measures," it said in a statement. The European Commission set the 2013 budget at 138 billion euros, up 6.8 percent but France, Finland and Germany wanted it cut by 5.0 billion euros while London suggested even more. Tuesday's vote means the parliament and the European Council, which groups the member states' political leaders, will now have to take up the 2013 budget again to reconcile their differences. If they cannot do that, then the 2012 budget becomes the basis for next year with an increase capped at around 2.0 percent, and the same formula would be applied in 2014 if no accord is reached. Most want to avoid that outcome however because it would mean no change to their contributions nor, just as important, to the balance of spending -- some 40 percent on agriculture and about the same on social cohesion funds. That could form the groundwork for compromise after all and significantly, EU sources said Thursday that the Cypriot EU presidency was looking at a cut of 40 billion euros in the 2014-20 budget. Such a reduction would trim the budget back to about 1.0 percent of EU gross domestic product, compared with the commission's plan at 1.08 percent. Germany, Europe's paymaster and its strongest economy, reportedly favours a level around 1.0 percent. But one step forward, one step backwards. "All areas will be covered by the cuts," one of the sources said -- including the British rebate.