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EU in trouble as summit faces collapse

Nov 18 2012 16:55 Sapa-AFP

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Brussels - The European Union looks set for fresh trouble this week as an extraordinary summit called to agree a long-term trillion-euro budget heads for an ugly showdown, possibly even failure.

Already weakened by three years of economic crisis, the 27-nation bloc of half a billion people faces new trauma at the two-day summit starting Thursday after weeks of talks that have exposed stark divisions between pro- and anti-austerity nations, as well as between the haves and have-nots.

"It's a lose-lose summit," said a senior EU diplomat. "Absolutely no one will leave this summit content if by chance we reach a solution."

"We don't exclude a breakdown," another diplomat told AFP on condition of anonymity.

Europe's leaders begin the talks on the EU's next seven-year budget at 19:00 Thursday, with Britain's premier David Cameron in the role of leading spoiler though most governments are putting national interest well above shared concerns.

"Cameron will come with a big knife to get spending cuts and to defend the British rebate," said an EU diplomat.

In the face of Britain's austerity-minded determination to secure a cut of up to €200bn in the 2014-2020 budget, EU president Herman Van Rompuy, who will broker the talks, last week suggested a €75bn cut to the proposed €1.047 trillion budget.

But that made no one happy.

Spain said it would lose €20bn of EU aid, Italy complained of losing €10bn.

And a group of Nobel laureates flew to Brussels waving a petition signed by dozens of Nobel winners urging Van Rompuy and other EU officials not to strip funds for research and innovation.

"Fortunately, we only have these summits every seven years," Van Rompuy said Friday after coming under fire from all sides.

His plan left Britain having to pay in part for its cherished yearly rebate of €3.6bn, while diminishing Sweden's rebate, and failing to address Denmark's demand to have a discount too.

Tired of bearing the brunt

The three are among the 11 net contributors to the EU budget who in times of economic strain and domestic cutbacks are tired of bearing the brunt of the financial burden.

Eight of the net contributors -- Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden -- have banded together to demand spending cuts, though they are far from being on the same page on what should go or by how much.

France for instance, along with Italy, is refusing any decrease whatsoever in the budget's biggest item, the subsidies paid to farmers, big and small.

"There can be no question of withdrawing even one euro from the Common Agricultural Policy (CAP)," said French Premier Jean-Marc Ayrault, whose government is pushing for the EU to raise new revenues through new taxes, such as one on financial transactions.

In the other corner are 15 nations from Europe's east and southern fringe who are net recipients, most often of the so-called "cohesion funds" used to help poor regions catch up economically and socially with the rest. This is the second biggest budget item after the CAP.

Chaired by Poland and Portugal, the group includes Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Romania, Slovakia, Slovenia -- and most recently, once mighty Spain.

Cameron, who is under intense euro-sceptic pressure to wrest an agreement in Brussels, has been shuttling back and forth to raise support, travelling to the Netherlands, Italy and Germany in search of allies.

Chancellor Angela Merkel of Germany, which is the biggest contributor to the EU budget, has promised to do her utmost to ensure the summit would not end in collapse.

"Even if we are net contributors and people could perhaps think that we can live with a non-agreement, that is not our goal," Merkel said. "We want an agreement and we will talk exactly in this spirit with all countries."

Meanwhile, there is a growing exasperation with France, whose recently elected Socialist President Francois Hollande has urged Brussels to push for growth, rather than austerity, but whose obsession with maintaining the CAP will lead to cuts in programmes to help growth.

"He wanted to re-orient Europe towards employment and growth. It's a political choice. He must be consistent," said an EU official who asked not to be named.
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