EU summit ends without budget deal, Cyprus bailout sees glimmer of hope

The European Union (EU) concluded a summit Friday without a deal on the 27-member bloc's long-term budget, while international lenders and Cyprus made "good progress" toward a bailout plan for the crisis-hit country. After the two-day special summit, negotiations on the EU's trillion-euro budget framework for 2014-2020 were postponed until early next year. "Based on my proposal, there is no agreement," European Council President Herman Van Rompuy said in a press conference, referring to an 80-billion-euro (103.2 billion U.S. dollars) cut from the European Commission's original proposal of 1-trillion-euro spending program. The summit still showed a sufficient degree of potential convergence to make an agreement possible at the beginning of next year, the president added. He has been mandated by EU member states to continue working towards consensus in the coming weeks, together with European Commission President Jose Manuel Barroso. "There is an interest in compromise. The costs of no agreement will be huge, including political, economic and social costs," Barroso said in the same press conference. The so-called multiannual financial framework is to decide the ceiling and structure of EU spending over a seven-year period, which also shapes the bloc's policy priorities, although its actual budget is decided annually in separate negotiations. It only accounts for about 1 percent of the EU's gross domestic product and is mainly used for agricultural and infrastructure projects in southern and poorer regions. There has been a major clash between net contributors of the budget and net recipients at a time of three-year debt crisis. In particular, British Prime Minister David Cameron insisted on cutting "unaffordable spending," adding that Van Rompuy's proposal was not good enough for his country and many others. A source of both solidarity and tension, the EU budget reflects the conflict of national interests, as well as opposing arguments on how to fix the crisis and save Europe's future. However, Van Rompuy emphasized that it would be a budget for growth, as agreed by all EU leaders, focusing on jobs, innovation and research. If no deal can be reached by the end of next year, the 2013 budget ceiling will be rolled over into 2014 with 2-percent inflation adjustment, which may bring much uncertainty for long-term projects. Also on Friday, potential international creditors said they and Cyprus, an EU member nation, had made good progress in negotiations on a possible bailout but more work was needed and talks would continue. "Discussions are expected to continue from respective headquarters with a view to making further progress toward a potential program," the International Monetary Fund (IMF), European Commission and European Central Bank -- also known as the troika -- said in a statement. "The preliminary results of a bank due-diligence exercise, expected in the next few weeks, will inform discussions between official lenders and Cyprus on financing solutions consistent with debt sustainability," the statement added. The lenders said their mission has had "productive discussions" with the Cypriot authorities on the policy building blocks of a macroeconomic adjustment program. The authorities and the troika made "good progress" towards agreement on key policies to improve public finances, restore the health of the financial system, and strengthen competitiveness, so as to pave the way for the economy to return to sustained growth and financial stability. Earlier in the day, Cypriot government spokesman Stefanos Stefanou said Cyprus had concluded a bailout deal with the troika and a confirmation is expected from the lenders. Cyprus was in a hurry to finalize a bailout deal with international lenders for a provisional sum of 17.5 billion euros (about 22.7 billion dollars) before eurogroup finance ministers' meeting on Dec. 3. In June, Cyprus requested assistance of the EU and the IMF in securing cash mainly for the recapitalization of its banking system, which suffered heavy losses on account of its exposure to the Greek debt.