Negotiations to decide 2013 EU budget stall

Talks on the EU budget for next year broke down last night, a development which augurs badly for a separate negotiation in a fortnight of a new seven-year spending plan for the union.

Governments, the European Parliament and the EU Commission met for eight hours before the engagement was suspended.

The talks are especially contentious as they involve an increased European budget at a time when the EU authorities are pushing most member states to retrench expenditure.

“I very much regret that we couldn’t reach agreement tonight but I remain hopeful that we can come to some compromise in the coming days,” said Minister of State for Finance Brian Hayes.

The parties resolved to return to Brussels next Tuesday to make a fresh push for a deal before a crucial legal deadline expires at midnight that night.

If they cannot settle their differences by then, the commission will be legally obliged to develop a new budget proposal from scratch with the aim of reaching agreement by the end of the year. This would greatly complicate parallel talks on a €1 trillion EU budget for the period from 2014 to 2020.

EU leaders are due in Brussels on Thursday week for a summit to decide on the seven-year plan, but a British threat to veto any deal which does not freeze spending has raised serious questions.

While the multi-year plan sets the overall spending thresholds, annual budgets are still subject to negotiation at this time of year between governments and MEPs.

Multi-year plan

The 2013 budget is the last to fall under the ambit of the current multi-year plan. The parliament’s power of “co-decision” in this area means the plan must meet with its approval.

“I believe an agreement is important, to show citizens that we are committed to a well-funded EU budget that can support economic recovery,” said Mr Hayes.

At issue, primarily, is the size of the 2013 spending plan, with governments pushing back strongly against demands from MEPs for an inflation-beating 6.82 per cent budget rise to €137.9 billion in payments.

The commission had proposed a 6.85 per cent rise but governments say the increase should be no greater than 2.79 per cent, which would bring payments to €132.7 billion. The main dispute yesterday centred on a €9 billion shortfall in 2012.

The commission asked for €9 billion in new contributions from member states to bridge the gap between agreed expenditure and money actually spent.But governments baulked at providing that entire amount and urged the commission to redeploy funds from other areas.

The commission is now under pressure to find a way of financing €9 billion in a manner acceptable to governments and MEPs, say diplomats.

“Clearly, in a circumstance where many of the countries are cutting budgets . . . they have got to go home and explain to their domestic parliaments and explain what is taking place,” said Mr Hayes.