Rich-poor clash resurfaces as EU leaders’ budget talks fail

EU leaders failed to agree on the bloc’s next seven-year budget, replaying the clash between rich and poor countries that has stymied the response to the euro debt crisis.

The 27 national chiefs plan another summit early next year, when northern countries, including Britain and Germany may have the upper hand in seeking to cut subsidies to less-developed southern and eastern economies clamouring for EU investment.

“Anything short of admitting that our talks have been extraordinarily complex and difficult would not reflect reality,” José Manuel Barroso, head of the European Commission, which manages the subsidy programmes, told reporters after a two-day meeting in Brussels.

Britain’s defence of its cash-back guarantee and France’s clinging to farm aid gave the summit the flavour of EU negotiations in the 1970s and 1980s, diluting efforts to equip Europe with a budget to make it more competitive in the face of emerging powers. Eastern and southern countries said reduced financing for public works projects would condemn them to lag behind the wealthier north.

At stake is a spending plan for the years 2014 to 2020 that would total about 1% of EU-wide gross domestic product. While that sum is paltry compared to the average 50% of GDP that each country spends inside its borders, the political resonance is far larger.

Wealthier countries such as Germany, Britain, Denmark, Sweden, and the Netherlands banded together to cut what they pay into the budget, pounding away at the original proposal of €1.033tn that came out in mid-2011.

By the time the summit started yesterday, the figure on the table was €973bn.

It was soon trimmed to €971bn, but was still too much for the financially stronger countries that pressed for an additional €30bn in cuts before signing up to a deal.

“For the upcoming weeks and months, my feeling is that we can go further, but it takes some preparatory work and it has to be balanced,” said the summit’s chairman, EU president Herman Van Rompuy.

— Bloomberg


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