EU summit ends without agreement on budget

A summit to agree a long-term budget for Europe ended without a deal today after failure to bridge deep divisions over spending priorities for the next seven years.

Europe’s tortuous budget talks are set to spill over into Ireland’s incoming presidency of the EU in January, complicating the task facing the Government after two days of talks in Brussels ended in failure.

The breakdown came follows deep divisions over the size ad allocation of a €1 trillion seven-year financial package and a British-led push for big cuts from administration expenditure.

Although there was no sense in diplomatic circles that the development had triggered a crisis, it still came amid anxiety at the highest levels that collapse would provide another example of EU leaders failing to settle their differences.

The summit, which had been expected to drag into the weekend, comes before the leaders confront unresolved debt crisis questions over the enforcement of economic policy and the stalled “banking union”.

After several hours of fruitless talks today, EU leaders cut short the negotiation and asked European Council president Herman Van Rompuy to continue private discussions in the coming weeks with a view to reaching a deal early in the New Year.

While a revised draft budget he tabled yesterday left room for further compromise in the future, summit insiders said the leaders were too far apart today for the talks to continue.

With only a six-month window for the Government to pursue its presidency agenda, the lack of a deal will hinder one of its prime tasks: advancing 68 separate items of legislation to give effect to the budget.

This is already a highly-complex process, necessitating detailed talks with other governments and the European Parliament.

Even though Taoiseach Enda Kenny had said as he arrived in Brussels that any failure to strike a deal would undermine the authority of the presidency, he said this evening that the Government will embrace the challenge.

“What I was saying last night was that my preference would be to have it over and done with and that we could proceed on in Ireland’s presidency in dealing with the issues of reform in the sectors that arise from the budget,” the Taoiseach said.

The talks were marked by a big play for budgetary restraint from London and efforts by German chancellor Angela Merkel to avoid isolating British prime minister David Cameron.

“Brussels continues to exist as if it is in a parallel universe,” Mr Cameron said.

“More than 200 Commission staff earn more than I do. Any EU staff not from Belgium get a 16 per cent expatriation allowance on top of their generous salaries, even if they have lived in Brussels for more than three decades.”

While Mr Cameron said European institutions must adjust to the “real world” in an era of austerity, European Commission chief José Manuel Barroso did not yield to pressure to for more cuts to the administration budget.

Mr Barroso’s resistance was seen in diplomatic circles as a ploy to maintain the support of MEPs, who must approve any budget deal by an absolute majority.

This a big source of potential trouble, particularly after Parliament president Martin Schulz signalled opposition to any freezing of the overall budget or any reduction late last night.

Although Germany and Britain were backed by countries like Denmark, Sweden and the Netherlands but France and Italy led a pushback – supported by Ireland – against any deeper cuts to the agriculture budget.

In a signal of ongoing strain in Berlin’s traditional alliance with Paris, Dr Merkel is said at one point to have publicly urged French president François Hollande to take account of Mr Cameron’s concerns.

“I see, when I look at the complete picture of possible compromise, readiness on all sides and good possibilities to reach agreement,” Dr Merkel told reporters.

“We must consider what it would mean if we were not to reach agreement. This possibility is extremely unattractive.”