No Deal on EU Budget!

European leaders failed to reach an agreement on the EU budget as tensions flared over whether to increase or cut the budget. Originally the European Commission wanted an increase in the budget to €1025 billion, David Cameron was less than pleased with this as he wanted a cut to €825 billion. This did not bode well for Cameron who, when it comes to EU proposals, tends to struggle to find allies. Yet on this occasion he may have found some friends, the Netherlands, Sweden and Finland are all firmly on the British side and Germany is sympathetic to the British viewpoint. Incidentally all of them contribute more than they get. Under this pressure, Herman Van Rompuy, the President of the European Council offered a new budget of €973 billion, still above what Cameron had hoped for.

The debate over the EU budget focused on a number of areas, spending on developing poorer areas of the EU seemed to be largely a non-issue and an agreement seemed closer on the issue of the farm subsidies. The lack of progress on cutting EU administration costs angered Cameron the most, although cutting the sky-high pay of some ‘eurocrats’ would make no meaningful dent in the budget, for Cameron it is important symbolism: European taxpayers should not have to suffer austerity at home whilst paying for ridiculously high EU civil servants’ pay. Britain’s rebate was not brought up, which is surprising considering the strong feelings of certain leaders. It could prove to be a flash point in the next round of debates as France’s President, Francois Hollande, is determined to have it reduced whilst David Cameron says that the rebate is non-negotiable.

A deal will be difficult to formulate as a budget needs to be approved by all 27 member states, with the wide range of opinions this will not be easy. David Cameron is under immense pressure back home, with Conservative backbenchers demanding a cut or a rebellion. They could succeed if Labour also opposes the budget proposal, at the moment Labour seems intent on opposing whatever the government suggests.  Yet blocking a budget could produce more problems that it would solve. The nature of EU budgets is that if a budget is not agreed then the old budget would roll on, with added spending. The results would be the budget rising even higher than what the EU Commission asked for in their original proposal. An agreement must be reached or the UK will much more than it wants.