EU negotiators agree 2% increase in 2012 budget to €129bn


BRUSSELS – European Union negotiators have agreed to a 2 per cent rise in the budget for next year to €129 billion, following more than 15 hours of talks which ended in the early hours of Saturday morning.

The deal was seen as a victory for national capitals grappling with the debt crisis, which had opposed demands to increase the budget by more than 5 per cent.

More than two-thirds of the EU budget is spent on subsidies for farmers and regional aid funds, which finance road construction, environmental clean-ups and other projects.

Some EU officials however said limiting the budget rise to forecast inflation for next year could leave the union unable to pay its bills and threaten its AAA credit rating.

“This is clearly an austerity budget, as most member states are in the midst of a serious financial crisis,” said budget commissioner Janusz Lewandowski, who had originally proposed a 5 per cent rise in spending in 2012.

“There is now a serious risk that the European Commission will run out of funds in the course of next year and will therefore not be able to honour all its financial obligations towards beneficiaries of EU funds,” he said.

That is because while agreeing to limit their contributions to the EU budget to €129 billion, governments gave in to the European Parliament’s demands to allow EU spending commitments next year to go up to €147 billion.

“Today’s commitments become tomorrow’s payments, so they are playing a very dangerous game indeed,” said one EU official.

Britain’s financial services minister Mark Hoban said: “This is an excellent deal for the UK. We have stopped the European Commission and parliament’s inflation-busting proposals and have delivered on the government’s promise to freeze the EU budget in real terms.” – (Reuters)