EU braced for budget fight with UK

British Prime Minister David Cameron is refusing to surrender the EU rebate.

Story highlights

  • European diplomats are concerned Mr Cameron is serious about demanding a freeze in the budget
  • A move to veto the budget could be politically attractive to Britain
  • The prime minister believes a two-tier Europe is inevitable and has talked of seeking "fresh consent" of British people
  • To further exacerbate tensions, Mr Cameron is refusing to surrender the British rebate

Brussels is bracing itself for a battle with David Cameron as fears grow that the British prime minister will block a proposed €1tn seven-year spending plan and push for a two-tier EU budget.

Mr Cameron is understood to be interested in Brussel's longer-term plan of a separate spending programme for the eurozone, with UK and European officials considering a compromise that would see the EU budget split in two -- marking a further acceleration towards a divided Europe.

"This idea is gaining momentum," said a British official. "It could mean restraint in the overall EU budget but still provide eurozone countries with more funding from Brussels to support restructuring measures."

European diplomats are growing increasingly concerned that Mr Cameron is serious about demanding a freeze in the budget at next month's budget summit, with one saying: "He'd be delighted to veto a deal -- he'll be greeted at home like a hero."

As the Conservative party gathers for its annual conference in Birmingham, Mr Cameron is being urged by ministerial colleagues to relive his "veto moment" of last December, when he won plaudits in Britain for opposing an EU fiscal pact.

László Andor on Europe's job crisis
László Andor on Europe's job crisis


    László Andor on Europe's job crisis


László Andor on Europe's job crisis 04:22

A move to veto the budget could be politically attractive to Britain, as it would allow Mr Cameron to argue that the UK was not propping up the eurozone. The UK is also suggesting moving to a five-year budget because of economic uncertainty.

Mr Cameron had hoped for French and German support, but British diplomats fear the November summit could turn into a classic confrontation between London and most of the rest of the EU.

The prime minister believes a two-tier Europe is inevitable and has talked of seeking the "fresh consent" of the British people of this new relationship in the next parliament in a clear signal that he favours a referendum.

William Hague, foreign secretary, told Saturday's Daily Telegraph this consent is likely to be in "a general election or referendum". However, Tory MPs are demanding a straight European plebiscite.

Michael Fallon, Tory business minister, told the Financial Times: "We haven't had a referendum on Britain's continuing membership of the EU since 1975." He said that Mr Cameron's so-called "veto" at last December's summit was "very refreshing".

David Lidington, Britain's Europe minister, told colleagues in Luxembourg last month: "When the prime minister talks about the real-terms freeze being a red line to him and not a negotiating position -- that is the stark truth."

To further exacerbate tensions, Mr Cameron is refusing to surrender the British rebate -- an EU refund secured in perpetuity by Margaret Thatcher in 1984.

Germany believes the British threat of a veto is counterproductive. One Berlin official said: "We need fair burden-sharing, and therefore the British [budget] rebate is no longer acceptable. That has been made clear by Germany in Brussels and in London."

      Europe's financial crisis

    • German Chancellor Angela Merkel talks with Finance Minister Wolfgang Schaeuble during a session at the Bundestag (lower house of parliament) on June 25, 2013 in Berlin.

      Schaeuble: 'Don't see' bailouts

      German Finance Minister Wolfgang Schaeuble says the eurozone's problems are not solved, but "we are in a much better shape than we used to be some years ago."
    • IBIZA, SPAIN - AUGUST 21:  A man dives into the sea in Cala Salada beach on August 21, 2013 in Ibiza, Spain. The small island of Ibiza lies within the Balearics islands, off the coast of Spain. For many years Ibiza has had a reputation as a party destination. Each year thousands of young people gather to enjoy not only the hot weather and the beaches but also the array of clubs with international DJ's playing to vast audiences. Ibiza has also gained a reputation for drugs and concerns are now growing that the taking and trafficking of drugs is spiralling out of control.  (Photo by David Ramos/Getty Images)

      Spain keeps partying

      Summer could not have come soon enough for Lloret de Mar, a tourist resort north of Barcelona. Despite the country's troubles, it's partying.
    • The Euro logo is seen in front of the European Central bank ECB prior to the press conference following the meeting of the Governing Council in Frankfurt/Main, Germany, on April 4, 2013.

      OECD: Slow recovery for Europe

      The global recovery has two speeds: That of the stimulus-fed U.S. and that of the austerity-starved eurozone, according to a new report.
    • The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.

      Europe's new threat: Slow decay

      The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
    • Packed beaches and Brit pubs? Not necessarily. Here's what drew travelers to one of Spain's most beautiful regions in the first place

      Spain aims for big tourist summer

      Spain's economic crisis is in its sixth straight year yet tourism, worth 11% of GDP, is holding its own, one of the few bright spots on a bleak horizon.
    • Photographer TTeixeira captured these images from a May Day protest in Porto, Portugal, Wednesday by demonstrators angered by economic austerity measures. "People protested with great order, but showed discontent against the government who they blame for this economic crisis," she said. "They want the government to resign and the Troika [European Commission, International Monetary Fund and European Central Bank] out of this country."

      May Day protesters flood Europe

      As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
    • Croatian Prime Minister Zoran Milanovic delivers a speech in Mostar, on April 9, 2013. Prime Ministers from Bosnia's neighboring countries arrived in Bosnia with their delegations to attend the opening ceremony of "Mostar 2013 Trade Fair".

      Croatia PM: We need Italy to recover

      As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."
    • Anti-eviction activists and members of the Platform for Mortgage Victims (PAH) take part in a protest against the government's eviction laws in front of the Popular Party (PP) headquarters in Mallorca on April 23, 2013.

      Spain's unemployment hits record

      Spain's unemployment rate rose to a record high of 27.2% in the first quarter of 2013, the Spanish National Institute of Statistics said Thursday.
    • People protest against the Spanish laws on house evictions outside the Spanish parliament on February 12, 2013 in Madrid, Spain.

      Welcome to Madrid: City of protests

      Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.