EU leaders near 960 billion euro budget deal

Prime ministers from various European countries pose together at the European Council Meeting on Thursday in Brussels.

Story highlights

  • It would be a sharp cut from the €1,033bn first proposed by the European Commission
  • The summit comes less than three months after a previous effort to agree the budget collapsed
  • Deal requires unanimous approval from all 27 member states and consent of European parliament

EU leaders are on the brink of agreeing a €960bn long-term budget after an all-night bargaining session in Brussels as fiscal hawks, including the UK and Germany, appeared to prevail over those member states seeking more robust spending.

If approved, the budget, which covers the seven-year period from 2014 to 2020, would be about 3 per cent less than the current long-term budget and represent the first ever decline in EU spending.

It would be a sharp cut from the €1,033bn first proposed by the European Commission, the EU's executive arm, at the outset of negotiations.

The compromise emerged after a bruising battle that saw Britain's David Cameron leading demands for deep cuts to reflect the austerity undertaken by many governments and François Hollande, French president, rallying the defence of EU spending to help recession-hit economies.

Angela Merkel, the German chancellor, helped broker the likely deal with Herman Van Rompuy, European Council president. It includes €1bn cuts in spending on the Brussels bureaucracy, big reductions in cross-border infrastructure projects supposed to boost growth, and a special €6bn fund set up to tackle youth unemployment.

"We feel pretty confident now that we will get an agreement," an EU official said on Friday morning, although he cautioned that a deal was not yet done. Finalising a host of smaller issues could require hours of additional haggling among the bloc's 27 leaders, officials said.

The leaders broke for a two-hour break at 10am (9am GMT) on Friday.

But in an ominous warning of trouble ahead, Martin Schulz, president of the European parliament, said his institution might yet reject it.

"The further we step away from the commission's proposed figures, the more likely the proposal will be rejected," he said, adding that MEPs were "extremely sceptical".

The summit comes less than three months after a previous effort to agree the budget collapsed. Several diplomats have warned that another failure would be far more costly because it could be at least a year before they could resolve the matter -- a delay that would disrupt billions of euros in EU spending.

In a display of the tension and ill-temper that characterise one of the EU's most notorious exercises, Mr Hollande refused to attend a Thursday afternoon meeting with Mr Cameron and Ms Merkel, as he dug in against the British position.

Mr Van Rompuy delayed presenting a compromise until the early hours of Friday morning, forcing the EU leaders into more than 15 hours of negotiations before he presented his plan to shave a further €12bn from his November proposal. In addition to the €960bn figure, the package also included about €36bn in off-budget items.

Most of the new cuts come from a fund to build cross-border infrastructure that the commission has touted for its potential to generate economic growth. The budget for agriculture -- a key French priority -- is being spared further cuts, although the seven-year total is more than 10 per cent down on current spending.

The compromise sets the figure for budget "commitments" -- the maximum amount of money allotted during the seven-year period -- at €960bn, while budget "payments" -- the amount of money that can actually be spent -- are more sharply reduced by €34bn to €908bn.

The latter figure is the key target for the UK government in its campaign for outright cuts. Although commitments have long been the standard measure for EU budgets, Mr Cameron has focused relentlessly on payments in an effort to present the smallest possible figure to voters back home, who are increasingly sceptical of the EU.

The final result was more than the €886bn demanded by British officials in the early stages of the talks. But the reductions should be more than sufficient for Mr Cameron to sell the deal to the UK parliament.

Mr Schulz was particularly critical of the accounting finesse -- widening the gap between payments and commitments -- Mr Van Rompuy used to accommodate the French and British positions.

Doing so would result in future deficits for an EU that was already grappling with a mounting pile of unpaid bills, he said. "More and more tasks, and less and less money -- the inevitable result is budget deficits," Mr Schulz tweeted. "The [European parliament] will not go along with this."