Skip to main content

Divisive EU budget talks break up without deal

By Laura Smith-Spark, CNN
updated 4:00 PM EST, Fri November 23, 2012
  • NEW: EU leaders should be able to reach a deal early next year, European Council says
  • Germany's Angela Merkel says leaders should take the time to make a solid deal
  • Cameron says the current proposal was not acceptable to Britain and others
  • The European Commission wants to increase its budget for 2014-2020

(CNN) -- A European Union summit aimed at setting the bloc's next seven-year budget broke up without a deal amid divisions over EU spending at a time of wide austerity.

EU leaders had entered a second day of talks in Brussels struggling to overcome divisions over a proposed increase to the European Commission budget for 2014 to 2020 to about to $1.2 trillion (1 trillion euros).

Leaders of the 27 member states that comprise the European Union talked late into the night on Thursday without reaching agreement on a revised budget plan put forward by European Council President Herman Van Rompuy, who chaired the summit.

German Chancellor Angela Merkel said after the summit adjourned that it was important to take the time to agree to a strong and durable plan.

Sustersic talks Greece, eurozone
SAP's Snabe: No need for 'Grexit' plans
Small towns attract Spanish job seekers

Leaders expect to resume their discussions early next year, and there was some indication they may be able to come together to resolve differences on the size of a budget and questions about fairness.

The European Union's yearly spending amounts to about 1% of the region's annual economic output and current budget wrangling comes as the continent struggles with serious economic challenges that have reverberated globally.

Disparities have persisted within the European Union between economically strong members, such as Germany, which has fronted European bailout money, and economically weaker ones, like Greece, which are experiencing strict austerity and unemployment.

Van Rompuy told reporters his proposal had prioritized growth, jobs and innovation -- and that it was 80 billion euros lower than the initial budget proposed by the European Commission, making it a real cut compared to the 2007-2013 period.

"This is a first in EU budget talks," he said

Van Rompuy also pointed out such negotiations are complex and said it was worth taking the time to agree a solid deal.

"This is the budget for the rest of the decade. And the next seven years will be crucial to put Europe back on the path of recovery and growth. So we must get it right," he said.

Some countries believe the EU budget should be frozen or reduced since they have to make heavy cuts to their own national spending plans. Other countries, particularly those that draw more EU funding than they contribute, are opposed to cuts or a freeze.

Most funding comes from member-state contributions. Germany is the largest contributor, providing about 20% of its total budget. Other net contributors include Britain, France, the Netherlands, Denmark and Sweden.

Read more: Minister: France 'not sick man of Europe'

"Our position is very simple. We cannot increase spending at the EU when we are cutting it at home. We argued for a cut or, at the very least, a freeze in spending," British Prime Minister David Cameron said.

He said that Britain had approached the talks constructively, but it and other net contributors were not prepared to make a deal "at any cost."

"Frankly, the deal on the table from the president of the European Council was just not good enough," Cameron said.

Read more: EU leaders agree on bank oversight

However, Cameron added that there was progress in establishing the positions of various nations and that a deal was still "doable" in the future.

Ahead of the summit, Cameron had threatened to exercise Britain's veto, if necessary, to protect its interests.

Read more: Catalonia's fight for independence: Lessons from the Dutch revolt?

The European Council said in a statement that the talks had shown "a sufficient degree of potential convergence to make an agreement possible in the beginning of next year.

"We should be able to bridge existing divergences of views. A European budget is important for the cohesion of the Union and for jobs and growth in all our countries."

Read more: EU leaders brace for tough budget summit

The biggest chunk of the proposed budget is set aside for cohesion funding, or spending that seeks to narrow the economic gap between different EU states. Another large slice goes to the Common Agricultural Policy, or aid for farmers.

The CAP has historically been a bone of contention among EU member states, with those that don't have a large agrarian sector getting less out of it than those that do. France is among those that oppose cuts to CAP funds.

Many countries in central or eastern Europe also oppose cuts to cohesion funding, which helps pay for big infrastructure projects such as new roads or public transportation links.

The budget also earmarks substantial funds for competitiveness and growth, a major concern as many EU states face record levels of unemployment. Efforts to try to boost growth and job creation are a high priority, but cost a lot of money.

Administration costs and international development aid outside the EU also make up part of the total.

Part of complete coverage on
updated 3:43 PM EDT, Tue August 27, 2013
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."
updated 11:28 AM EDT, Wed September 4, 2013
The G20 is held in Russia but, amid disagreements over Syria, can anything be done? John Defterios investigates.
updated 11:02 AM EDT, Wed July 10, 2013
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.
updated 1:50 PM EDT, Fri June 7, 2013
The euro club has suffered major shockwaves but its newest member has emerged as an economic star. What;s behind Estonia's success?
updated 9:23 AM EDT, Wed May 29, 2013
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.
updated 9:26 AM EDT, Tue May 14, 2013
The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.
The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
updated 10:56 PM EDT, Sun May 26, 2013
Europe's competitiveness is threatened as manufacturing companies scrambling to find enough skilled engineers.
updated 11:02 AM EDT, Wed July 10, 2013
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.
updated 6:44 AM EDT, Thu May 2, 2013
As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
updated 8:10 AM EDT, Fri April 26, 2013
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."
updated 12:56 PM EDT, Thu April 25, 2013
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.
updated 9:55 AM EDT, Mon March 25, 2013
The financial uncertainty in Cyprus is generating images of long lines at ATM machines and anti-European Union protests.
updated 2:15 PM EDT, Mon March 25, 2013
Cyprus will "step up efforts in areas of fiscal consolidation." Where have we heard that before? Oh yes. Greece.
updated 9:39 PM EDT, Fri March 22, 2013
The Cyprus debt crisis is being felt by the banks but also by the people who work at them. Nick Paton Walsh reports.
updated 8:10 PM EDT, Thu March 21, 2013
CNN's Nick Paton Walsh reports on a Russian hotel maid caught up in Cyprus' financial crisis.
updated 12:08 PM EDT, Mon March 18, 2013
Never underestimate the capacity of the Eurozone to shoot itself in both feet, says CNN's Richard Quest.
updated 11:03 AM EST, Thu February 21, 2013
Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.