EU budget left hanging as talks fail (Roundup)

Nov 16, 2010, 0:44 GMT

Brussels - A last-ditch attempt to approve the European Union's budget for 2011 ended in failure early on Tuesday, as European Union governments and the European Parliament remained locked in a power struggle.

'The intransigence of a few member states in the council (of EU states) undermines the confidence of our citizens that the EU is working effectively,' EU parliament president Jerzy Buzek lamented in a statement.

The two sides had until midnight local time (2300 GMT Monday) to find a deal. But talks still broke down, despite parliamentarians' having bowed to governments' demands to limit budget increases to 2.9 per cent, rather than the 6.2 per cent they had originally asked for.

In return, deputies asked for a 'legally-binding' promise to be involved in future discussions on long-term EU financing, giving them a platform to call for an EU-wide tax and the scrapping of national rebates that benefit Britain, the Netherlands and others.

In addition, they wanted to maintain a rule allowing governments to agree on spending top-ups of up to 0.03 per cent of the EU's gross national income by qualified majority. Under some interpretations of the Lisbon Treaty, the new EU rulebook, that decision should not be taken by unanimity.

Both requests went too far for a group of EU members led by Britain and the Netherlands, two countries that are traditionally more eurosceptic than other EU peers. Sweden supported them, diplomats said.

Belgian budget minister Melchior Wathelet, representing the rotating presidency of EU states, unsuccessfully tried to get the parliament to agree on the overall budget figures, postponing discussions on the two unresolved side issues.

Earlier on Monday, EU governments discussed whether they could offer lawmakers a 'political declaration' that would address their concerns in a sufficiently vague way so as not to upset British, Dutch and Swedish sensitivities.

But the text that emerged did not go far enough. Instead of responding to parliament's demand to be fully involved in talks on EU financing, the draft simply offered 'regular meetings ... to promote consultations.'

'It is a declaration which we find very poor and weak,' Buzek complained.

The British-led camp retorted that the Lisbon treaty limits the amount of say lawmakers can have on the issue.

'They are asking for something that goes beyond the treaty,' a senior diplomat stressed.

Tuesday's failure means that the European Commission, the EU's executive arm, will be forced to submit to governments and lawmakers another budget proposal, hoping they can agree on it before the year ends.

That raises the spectre of acrimonious discussions at next month's EU summit, scheduled for December 16-17.

If a deal still proved elusive, the 2010 budget would be rolled over to 2011 on a monthly basis, imposing a freeze on overall spending levels and limiting the scope for big payments.

'I don't want to be overdramatic ... but do not underestimate all the problems,' EU budget commissioner Janusz Lewandowski told the warring sides.

As an example, he cited agriculture subsidies due to be paid in January, which were budgeted at 30 billion euros. With the budget's monthly lockdown, only 6 billion will be available 'and the difference will have to be made up by member states,' Lewandowski warned.

Officials said the spending freeze would also complicate the upcoming launch of the External Action Service - the EU's diplomatic service - and the setting of new financial market watchdogs, as well as the funding for the ITER experimental fusion reactor.