While British Prime Minister David Cameron is seeking to keep payments into EU coffers down as low as possible, French President Francois Hollande called for sustained subsidies for farming and development programs for poorer nations.
With each of the 27 nations having the power of veto over the 2014-2020 budget, the summit negotiations could stretch over the weekend, perhaps without result.
Cameron voiced the concerns of several other countries that do not want to see an increase in the bloc’s spending plan at a time when many member states are cutting budgets at home.
“No, I’m not happy at all,” Cameron said about EU President Herman Van Rompuy’s latest offer to cap spending for 2014-20 at $1.28 trillion.
“Clearly, at a time when we’re making difficult decisions at home over public spending, it would be quite wrong — it is quite wrong — for there to be proposals for this increased extra spending in the EU,” Cameron said.
The EU budget primarily funds programs to help farming and spur growth in the bloc’s less developed, and it amounts to about 1 percent of the EU’s gross domestic product.
France’s Hollande said that was worth fighting for, adding he would be happy to walk away from the meeting if his demands were not met.
“No country should have a privileged position,” Hollande retorted. “I come here to find a compromise, not to set an ultimatum.”
The European Commission, the EU’s executive arm, supports more spending, arguing that cross-border initiatives will help create the economic growth and jobs that the bloc of a half-billion people needs, particularly during a financial crisis that has pushed some countries into recession.
Several leaders were already anticipating the possibility of failure and the need to hold another summit in the new year to negotiate a deal.
“Germany wants to reach a goal, but there might also be the need for yet another stage,” Chancellor Angela Merkel said.
Facing an ever more vocal Euroskeptic electorate at home in the U.K., Cameron is under huge pressure to veto any seven-year deal which would make the budget bigger. The U.K. and other countries that contribute more then they receive from the budget — such as the Netherlands, Sweden and, to a certain extent Germany — claim an austerity budget is the only justifiable outcome at a time when almost every member state has to cut its budget to lower debt.
Meanwhile, 15 of the EU’s most financially and economically vulnerable countries have joined forces to oppose any cuts to funds earmarked for economic growth and development. These countries include not only traditionally poorer member states, many in Eastern Europe, but also those hit hardest by the financial crisis, like Greece, Portugal and Spain.
They argue that they need sustained, even increased, help to close the wealth gap on the continent and that EU institutions need the means to implement their jobs and growth policies.
“Certain countries want to make drastic reductions in the budget. That’s a big mistake,” said Elio Di Rupo, Belgium’s prime minister.
With every country having the power of veto, Dutch Prime Minister Mark Rutte fully realized what was coming.
“There will be quite a battle to come — the French, the British, southern Europe, eastern Europe, we all have our demands,” Rutte said. “I don’t know whether it will work out.”
Going into the open-ended summit, which might well stretch into Saturday or beyond, Van Rompuy made a first compromise proposal that leaned toward Cameron’s demands. It proposes a cut of between $4 billion and $31 billion — depending on which year the cut is calculated against — from the $1 trillion proposal.
“With less money, we cannot do the same as before,” Van Rompuy wrote in the invitation letter he sent to the 27 leaders.
If the summit fails to find a compromise, the issue could spill over into a new meeting next month, or into next year. There is no set deadline for a deal but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs.
“In talks with colleagues, I had one message. If this doesn’t work out at once, let’s be sure that the mood is not that dark that we have to spend months on patching up personal relationships,” Rutte said.
If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 percent increase accounting for inflation.