Talks on next year’s EU budget ended in deadlock early today after Britain led a group of countries refusing to offer MEPs a bigger say in future spending priorities.
The European Parliament had already conceded its call for a 6% rise would be pegged back to just 2.9%.
But Parliament negotiators wanted face-saving commitments from EU finance ministers about MEPs’ increased role in long-term financing decisions.
The two sides abandoned efforts to agree after six hours of talks in Brussels - the second attempt in less than a week to settle the size of the EU’s 2011 budget.
A compromise seems unlikely before the end of the year – meaning the budget for next year is held at 2010 levels on a monthly basis until a deal can be done.
That effectively means a freeze on spending for the time being – which British Prime Minister David Cameron had demanded in the first place.
After the meeting European Parliament president Jerzy Buzek accused the UK and others refusing to give way of “intransigence”.
He went on: “We (MEPs) wanted a deal, but I regret that a few member states closed the door to the 2011 budget agreement.
“The intransigence of a few member states undermines the confidence of our citizens that the EU is working effectively. I warned ministers several times not to throw the baby out with the bathwater. Unfortunately for European citizens, they have just done that.”
MEPs were warned that a 6% increase would be unacceptable at a time of austerity and belt-tightening in national economies.
Mr Buzek retorted: “I have been a Prime Minister myself: I am fully aware of what austerity means.
“The EU budget is not part of the problem, it is part of the solution. It is a tool to strengthen our response to the crisis.
“The EU budget cannot and should not be compared with national budgets: the EU cannot run a deficit. The EU budget is an investment vehicle.”
He added: “Member states have taken a very unfortunate decision – now it is not clear how to finance many priorities for 2011: the EU’s new European External Action Service, emergency aid, our new European Financial Supervisory Authorities, subsidies for small businesses, plans to enhance natural gas pipelines and a fusion project to help meet our future energy needs.”
The budget battle began when MEPs, backed by the European Commission insisted the EU needed to boost its €130bn budget by 6% next year.
UK Chancellor George Osborne backed a freeze, but a majority of finance ministers settled on an offer of a 2.9% rise.
MEPs then voted to reinstate a 6% increase, after which Mr Cameron then turned the 2.9% “offer” into a take-it-or-leave- it maximum bid, by signing up 13 other EU leaders to a commitment not to go above the figure.
The number was enough to block any attempt by other EU leaders to compromise further with MEPs, and put paid to last night’s muscle-flexing by the European Parliament.
The European Commission described the failure to reach a budget deal as “highly regrettable” today.
A statement said: “The EU budget is not for Brussels. It is for European citizens, businesses, researchers, students, rural communities, towns, cities and regions across the Union.”
The Commission now starts work on a new draft budget for 2011, but the process will take months, involving approval from ministers and MEPs and probably more “conciliation” talks to agree exact spending figures.
Meanwhile, the EU will function financially on the basis of the “provisional twelfth” system – monthly payments at the same rate as the 2010 budget.
“This will delay the financing of important initiatives and investments in the member states: some 90% of the EU budget finance investments which create growth and jobs. Measures to boost economic growth and research and development in our member states will be delayed,” said the Commission statement.
“This is highly regrettable; we will immediately start working on a new draft budget with the view of having the Council (of ministers) and the Parliament reach a compromise on it in the shortest possible span of time.”