November 23, 2012 7:21 pm

Blame flies over budget ‘bazaar’

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It took Europe’s leaders two days to discover they could not agree on a €1tn budget but less than half an hour before the blame game started over who was responsible for the latest grinding episode of euro-stasis.

David Cameron accused José Manuel Barroso, European Commission president, for “insulting the European taxpayer” by failing to offer a single euro of cuts to the proposed €63bn budget for running the EU bureaucracy.

Some diplomats blamed Angela Merkel, German chancellor, and François Hollande, French president, for failing to patch up their strained relations to provide a lead in seeking a solution. Others said Herman Van Rompuy, the EU president and chief negotiator, showed a lack of urgency and imagination in the way he conducted the talks.

But perhaps the most surprising element in the post-mortem was how little blame was attached to David Cameron, Britain’s prime minister, whose promise to defend his country’s rebate and call for steep cuts had caused alarm in Brussels.

Mr Hollande plaintively asked at 1am on Friday morning: “Is anyone asking for more than the British?” But as the summit closed he made no effort to accuse Mr Cameron of causing it to fail.

Mr Cameron had asked for a further €30bn cut, Mr Hollande said, but he did not present the demand as entirely unreasonable. As for the British rebate, or refund, he said only: “Those who have a cheque don’t want anything to change, and France wants things to be reconsidered.”

EU leaders narrowed some differences over the long-term budget, but big disputes remained on some of the thorniest issues – its overall size, the balance of spending measures and the rules on national contributions.

Level of spending This was seen as the biggest potential obstacle to a deal, given the chasm between UK-led demands for a freeze and eastern European calls for a big increase. Herman Van Rompuy, the EU president brokering the deal, proposed cutting roughly €80bn from a starting point of €1091bn. Britain, Germany and Sweden wanted a further extra €30bn cut – a position unacceptable for France and Poland. But Francois Hollande, French president, later said this was “not impossible to overcome”. Mr Van Rompuy also indicated that “we have to go further” – although the freeze from 2011 levels sought by the UK appears unlikely.

Agriculture The biggest share of the EU budget, accounting for 40 per cent of spending this year. Mr Van Rompuy cut €25bn from a European Commission proposal days before the summit, infuriating France, the programme’s staunchest defender. In a controversial bid to win Paris back, he restored €8bn late on Thursday night, in part by raiding elements of the budget that had been touted for their ability to generate economic growth.

Cohesion Funds The development money known as “cohesion” funds form the second biggest part of the EU budget. They are a priority for the new member states from central and eastern Europe, led by an increasingly assertive Poland. Cohesion also drew support in the south from Spain, Portugal and Italy, among others. When negotiations resume, efforts to reduce the overall budget mean that cohesion funds for all but the poorest regions are sure to come under pressure.

Administration Britain and Germany are leading the charge to slash spending the EU bureaucratic machinery. But it has so far resisted any cuts. Most diplomats expect that the EU’s 55,000 civil servants will eventually bow to the inevitable.

Rebates EU leaders have accepted that no British prime minister could agree a deal that would sacrifice Britain’s budget rebate, which reduces London’s annual contributions by around €3.5bn. But Mr Hollande argued the “cheque” was no longer justified and that London must now help fund a fair deal for all net contributors, including France. Denmark and Austria are also demanding rebates. Little progress was made to reconcile the positions.

Europe’s leaders seemed determined to present Mr Cameron as a constructive partner in the negotiations – rather than the isolated, veto-wielding eurosceptic portrayed by many European newspapers this week.

“We tried not to isolate Cameron,” Dalia Grybauskaite, Lithuania’s president, told the Financial Times. “All the net contributors to the budget were having a problem. Germany was more accommodative, but also had problems.”

Angela Merkel was said by diplomats to be just as keen as Mr Cameron to lop another €30bn off Mr Van Rompuy’s revised budget, even if Mr Hollande claimed that was primarily to prevent the British premier from being “isolated”.

The fact that leaders have to return to this budget again in the New Year made it imperative to part on reasonably good terms, a harmonious message rammed home by Ms Merkel in her closing press conference.

Mr Cameron was anxious at all times to avoid being put in the position of scapegoat for the collapse of the talks, stressing that the Netherlands and Sweden were just as keen to rein in “unaffordable spending” as the UK.

After his isolation at a summit in Brussels last year over a new fiscal pact, Mr Cameron wants to get back into the fold as he tries to win friends for future fights on issues such as a proposed banking union and a possible renegotiation of Britain’s EU relationship. But his decision to hold out for a better budget deal will be welcomed by Tory MPs at Westminster, as will his hard-hitting attack on Mr Barroso, whom he accused of living in “a parallel universe” in refusing to countenance cuts to the EU civil service.

Mr Barroso’s stand rankled with a number of leaders – including Ms Merkel – as he and his officials warned that some cuts might represent a breach of contract or make it impossible to translate some national languages. Mr Van Rompuy said “improvising” cuts was unwise because it was “touching upon jobs”.

The ultimate breakdown of the talks in truth had little to do with Mr Barroso, whose alleged intransigence was described as “crap” by his officials. It had more to do with the complexity of running a negotiation with 28 countries – including new entrant Croatia – covering €1tn in under two days.

Whatever the criticism by some of Mr Van Rompuy’s tactics, the complexity of the task has been compared by Tony Blair – the British prime minister who concluded the last EU budget talks in 2005 – with negotiating the Northern Ireland peace process, only harder.

Hours before the formal meeting was to begin, Mr Van Rompuy was confronting a laundry list of last-minute demands from petitioners big and small, including a plea to restore aid money to Belgium’s Hainault province.

“There are dozens of swords of Damocles up there,” an aide said, refering to the meeting where heads of government were gathering.

Guy Verhofstadt, the leading Liberal and former Belgian prime minister, compared the scene of sleep-deprived politicians haggling over special deals to a “Turkish bazaar”.

Mr Hollande summed up the mood of weary resignation. “Of course we started far apart,” he said. “But there were no threats, no ultimatums.”

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