Deadlock at EU budget summit as rival camps dig in

Reuters | Feb 21, 2020 at 5:35 PM

* EU 27 seek deal on bloc's 2021-2027 budget

* Rich, poor nations deeply at odds over size, priorities

* EU coffers face 75 bln-euro gap after Brexit (Recasts and updates throughout, adds context)

BRUSSELS, Feb 21 (Reuters) - European Union leaders appeared no closer on Friday to agreeing on the bloc's long-term budget as poorer countries fought back in talks against "frugal" member states' vow to rein in spending.

Setting the seven-year budget is always a tug of war, but it is fiercer than ever this time because Britain's exit from the EU last month has left a 75 billion euro ($81 billion) gap at a time of costly new challenges from climate change to migration.

The standoff over the size of the 2021-27 budget and how to carve it up has exposed rifts between countries in the north and south, between east and west, and between more developed and less advanced economies.

Denmark, Austria, Sweden and the Netherlands - dubbed "the frugal four" - arrived at the summit on Thursday adamant that they would not accept a budget of more than 1% of the EU's economic output.

Beneficiaries of the joint budget, meanwhile, are asking for more than the baseline proposal of 1.074%, equivalent to 1.09 trillion euros ($1.2 trillion).

Those countries pushed back on Friday as the meeting of 27 leaders dragged on, raising the prospect of a fractious summit that - like others before it - would spill into the weekend.

Hungarian Prime Minister Viktor Orban swept into the media centre to tell reporters that countries that rely on "cohesion funds" to develop poorer regions wanted the budget set at 1.3%.

"This morning the friends of cohesion met together and we made a counter-offer," Orban said. "If we want an ambitious budget, it must be at least 1.3 or close to that. I don't think it will be bridged by just one negotiation."

Estonian Prime Minister Juri Ratas backed Orban up, declaring that the leaders were "quite far away" from a compromise.

Diplomats said the suggestion of 1.3% was a longshot riposte to the "frugals" that the beneficiary countries knew had no chance of getting adopted.

NEW NUMBER PROPOSED

European Council President Charles Michel, chair of the summit, was due to call the leaders together again at 1700 GMT and propose a new spending cap of 1.07%, two sources said.

A document circulating showed that would represent a spending reduction of about 10 billion euros over seven years compared to the original proposal.

The leaders are also squabbling over what to spend the money on. The poorer eastern and southern nations want to hold onto development aid, and they are backed by France, Ireland and others in seeking to uphold farm subsidies.

The "frugals" have balked at Michel's original proposal for a budget that allocates one-third for "cohesion funds" to develop poorer regions and another third on support for farmers.

Agriculture accounts for around 1% of the EU's economy.

Those countries, and Germany - the biggest net contributor - want to shift funds towards new priorities, including combating climate change, managing migration and expanding the digital economy.