EU looks to nudge down spending plans to break budget deadlock

Reuters | Feb 21, 2020 at 2:55 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 (Updates with latest proposal to break deadlock)

BRUSSELS, Feb 21 (Reuters) - European Union leaders were looking on Friday to rein in their proposed spending from 2021 in a bid to break a budget deadlock that pits the bloc's few wealthy net contributors against their poorer peers who benefit from handouts.

Some 24 hours of talks between the national leaders in EU hub Brussels have so far failed to bridge divisions over the size of their next seven-year budget and how to spend it.

Denmark, Austria, Sweden and the Netherlands have dug in their heels, insisting that spending not top 1% of economic output.

Beneficiaries of the joint budget, meanwhile, are asking for more than the baseline proposal of 1.074% of the bloc's gross national income, or a combined 1.09 trillion euros ($1.2 trillion) - roughly four times the value of Amazon's annual sales.

After German Chancellor Angela Merkel and French President Emmanuel Macron stepped in to push for a compromise, an EU official said the 27 leaders were looking for 10-20 billion euros worth of cuts to bring the overall cap to 1.06%, or less.

"The dynamic is towards cuts, not raising it," the official told Reuters. "If net payers can accept it, we will then see what cohesion countries think," the person said in referring to the less developed countries on the bloc's peripheries.

EU leaders had low expectations for a breakthrough on Friday and several said another leaders' summit would be needed in March to agree on the budget, which also faces a 75 billion euro hole after Brexit.

"I don't think we are going to reach an agreement," Prime Minister Mette Frederiksen of Denmark, one of the "Frugal Four", said earlier in the day.

Czech Prime Minister Andrej Babis channelled his frustration, saying the leaders "can go home" if the frugal members do not budge: "If we are so far apart, there is no basis for discussion."

MONEY FOR PRIORITIES

Some EU countries want extra funding to match new ambitions to fight climate change and manage migration, some want a continued focus on development and farm aid, and some are pushing to cut the overall budget after Britain - a key net contributor - left the bloc last month.

The wealthy net contributors are refusing to make up for the loss of Britain's fees and want to retain their current rebates. Their less-developed peers want to keep generous EU aid coming into their national coffers.

"The higher the volume is, the higher the rebates have to be. The smaller the volume is, the smaller the rebates can be. Then we will have to see how the cohesion countries take it," an EU diplomat said of talks led by Merkel and Macron.

If there is progress, EU leaders plan to reconvene from 1500 GMT to look at the new numbers. But they have until the end of the year to agree, so the chances of an early compromise appear low.

Beyond the size of the budget, the other fight is what to spend the money on. The poorer eastern and southern nations want to hold on to development aid. They are backed by France, Ireland and others in seeking to uphold major farm subsidies.

But Germany, the Netherlands and others want to shift funds towards new priorities, including combating climate change, managing migration and expanding the digital economy.