Last updated: November 23, 2012 6:48 pm

EU budget talks collapse over €30bn gap

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An EU summit that was to deliver an agreement on the bloc’s long-term budget collapsed on Friday, aggravating the same north-south divide among member states opened by the festering eurozone debt crisis.

Heads of government from the bloc’s 27 member states converged on Brussels on Thursday for a two-day meeting after more than a year of bargaining over the seven-year budget, which will cover roughly €1tn in spending from 2014 to 2020.

But the talks broke down on Friday afternoon after Herman Van Rompuy, the EU president, concluded that he could not bridge a gap as wide as €30bn between the spending demands of France, Spain and Italy and the relative austerity ordered by the UK, Netherlands, Germany and others.

The bloc’s new member states from central and eastern Europe, led by Poland, had demanded a bigger budget, though they were relegated to the margins as the biggest paymasters confronted each other

“We need some more time to finalise the solution,” Mr Van Rompuy said after the meeting, with aides predicting that leaders could reconvene early next year.

In the meantime, Mr Van Rompuy sought to play down the consequences, saying: “There’s no need to dramatise. These budget negotiations are so complex it generally takes two goes.”

That message contrasted with the warnings issued by EU officials in the days leading up to the summit that a failure would deal another blow both to the bloc’s weak economy by casting doubt on hundreds of billions of euros in public investments, and further undermine its self confidence.

José Manuel Barroso, the European Commission president, said there were “still important differences on a number of issues – especially the overall size of the budget and the fairness of the distribution”.

François Hollande, France’s president, indicated that the budget summit – a source of famously gruelling and bruising EU confrontations in past negotiations – remained civil. “Of course we started far apart. But there were no threats, no ultimatums,” he said. Germany’s Chancellor Angela Merkel said the strong differences of opinion were no cause for alarm. “We should be able to bridge those differences,” she said. “We have a reached a good basis to continue our work.”

Dalia Grybauskaite, Lithuania’s president, attributed the pleasant mood to the unusual polarisation of the parties, saying: “The atmosphere was surprisingly good because the divergence in opinions was so large there was nothing to argue about.”

In the immediate aftermath of the summit, David Cameron, the UK prime minister – who had staked out the most aggressive position in the debate over the last two years – appeared to have escaped the blame for the collapse.

He had been viewed as the biggest obstacle to a deal because of his insistence on a budget freeze consistent with the spending cuts in Britain. Fellow EU leaders acknowledged that he stood to gain more politically among his increasingly eurosceptic voters from blocking a deal than compromising to agree one.

Yet Mr Cameron drew support throughout the meeting from Swedish, Dutch and German allies, according to several diplomats, as the EU’s paymasters banded together to hold down the budget’s ceiling.

Some EU officials believed a bigger factor was the mistrust between Mr Hollande and Ms Merkel. The two have feuded at recent summits over the bloc’s response to the eurozone crisis, with Paris seeking to put the brakes on the austerity championed by Germany while drawing closer to Italy and Spain, two nations on the frontlines of the eurozone crisis.

“They don’t trust each other,” a senior EU official said. “They pay lip-service, they do shadow dancing, but they don’t cross the bridge.”

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