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Europe

EU leaders edge closer to budget deal

Bloc looks set to cut budget for the first time, with a tentative agreement to trim spending by three percent.
Last Modified: 08 Feb 2013 14:15
British Prime Minister David Cameron has been pushing for the EU to make drastic budget cuts [AP]

EU leaders look set to cut the bloc's budget for the first time in its six-decade history, with a tentative agreement to trim spending by three percent in absolute terms over the rest of the decade, diplomats say.

The deal that appears to be taking shape leans more towards the position of countries led by Britain, which are insisting that the EU has to make the same drastic cuts. But any deal needs unanimous approval and every country has a veto.

The countries favouring cuts are pushing for tens of billions of euros to be slashed off the 1.03 trillion euros ($1.35 trillion) originally asked for by the European Commission, the EU's executive arm, and were working off a proposal with a total of 960 billion euros ($1.29 trillion).

It included a two-year freeze on EU salaries and promised a 5 percent reduction in staff.

The draft left the newer - and generally poorer - members, which see Europe as a club that is only as strong as its weakest member, fighting for sustained funding.

Impasse

Led by Poland and France, they argue that Europe means nothing if the budget is not used to bridge the wealth gap and help restart growth.

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The proposal puts aside 6 billion euros ($8bn) to help regions with more than 25 percent youth employment, which has skyrocketed because of the economic crisis.

Both sides have threatened to walk away from the table - again - if they do not get what they want. The last summit to negotiate a budget in November collapsed without a compromise.

The EU, with a population of more than 500 million people and an annual gross domestic product of 12 trillion euros ($16 trillion), is the world's largest economy.

Its budget, which is separate from the national budgets, is designed in part to balance out the economic development of the region by injecting funding into poorer countries and has funded hundreds of thousands of infrastructure and capital projects.

It also includes items meant to generate economic growth in the future, and funds regulation and administration.

In his opening speech, European Parliament President Martin Schulz noted that a failure to reach a compromise would simply allow the current budget to roll over with an additional 2 percent for inflation - an outcome he said was workable.

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Source:
Agencies
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