Last updated: October 30, 2012 6:08 pm

EU draft budget leaves members divided

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Battle lines hardened over the EU’s next long-term budget as a plan to cut more than €50bn of proposed spending was deemed too meek by the UK and its allies – and rejected as too harsh by the European Commission.

The divergent reactions reveal sharp divisions over the budget – to cover roughly €1,000bn in spending from 2014-2020 – that have been exacerbated by a prolonged economic slump.

They also hinted at the difficulty of forging a compromise among the 27-member bloc at a two-day summit of EU leaders that begins on November 22 in Brussels.

The new plan was produced by Cyprus, the current holder of the EU’s rotating presidency, and was supposed to accelerate those negotiations. It marks the first time that hard numbers have been inserted into a so-called “negotiating box” that outlines spending plans, after more than a year of discussions among member states.

The commission, the EU’s executive arm, issued its own proposal a year ago, calling for €1,033bn to fund farm subsidies, research and development, infrastructure and other items. The commission’s proposal also included nearly €60bn in additional EU spending outside the budget.

A group of member states, led by Germany, have been seeking a budget that amounts to 1 per cent of the bloc’s collective GDP – or about €960bn – with all items included. That would require a reduction of at least €130bn from the commission’s proposal.

David Cameron, the UK prime minister, has sought an even bigger cut, calling for a budgetary freeze that would require a roughly €200bn reduction.

Cyprus described its slimmed-down proposal as “a starting point” and warned that “more sizeable reductions were needed in order to reach a compromise”. It spread more than €50bn in cuts across all fields, taking about €11bn from the commission’s proposed agriculture spending – the budget’s biggest category – and €12.5bn from the large pot of “cohesion” funds that mostly benefit poorer member states in central and eastern Europe.

The commission said it could not support the scaled-back budget proposal. But a British diplomat drew the opposite conclusion, saying: “The figures are still way too high, and there are still cuts to be made.”

The Cypriots also brought at least three spending programmes – for nuclear fusion, satellite navigation, and environmental monitoring – back into the formal budget. Meanwhile, they slashed €10.6bn – or more than a quarter – from one of the commission’s most highly touted initiatives: a €40bn “connecting Europe facility” to fund cross-border projects, such as gas pipelines.

José Manuel Barroso, the commission president, has frequently cited the fund as an example of how the EU budget can stimulate much-needed economic growth, drawing a distinction with the farm subsidies that critics have long derided as wasteful.

In a statement issued on Tuesday, the commission vented its displeasure. “This negotiating box is not supported by the commission,” it said, adding that its own proposal “strikes the right responsible balance in times of crisis”.

Mr Cameron will come under further domestic pressure over the EU budget if MPs vote on Wednesday for an overall cut in the EU budget rather than a freeze.

Mr Cameron has in the past threatened to veto anything less than a real-terms freeze in spending. Downing Street officials have taken a less defiant tone of late as Germany’s proposal appears to have gained traction and peeled off allies.

“We need to be realistic about the upcoming council. It is not going to be straightforward to reach agreement. There is no doubt that this will be a challenging negotiation,” a representative of Mr Cameron told reporters on Tuesday.

Sweden’s minister for European affairs, Birgitta Ohlsson, took aim not only at the size of the budget, but its composition.

Ms Ohlsson faulted the Cypriots for not cutting deeper into agriculture to preserve research and development and other priorities.

“The EU needs a budget for the future, not for the 50s,” she said.

The Cypriots left blank one of the budget’s more contentious headings: the administrative costs that cover salaries and benefits for EU staff.

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