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EU budget talks for 2011 collapse

Tough talks on the European Union’s budget collapsed at the stroke of midnight as a clash of wills in times of austerity left totemic plans to project the bloc on the global stage hanging by a thread.


As markets look to the EU to pluck Ireland and Portugal from financial doldrums on Tuesday, the 27-nation bloc crashed into an embarassing deadline on the last leg of its own desperate battle to draft a budget for 2011.

“There is no deal,” said the EU’s Belgian presidency, despite 15 separate attempts since a previous session collapsed on Thursday at re-writing a contentious political agreement between the 27 EU states and an emboldened EU parliament.

Since under strict EU rules there is a 15-day deadline for these matters to be sorted out, that meant talks had until Monday midnight to be resolved.

Parliamentary negotiators, who want full involvement in shaping future tax and spending policies, urged leaders of the 27-nation bloc “to tackle the issue” and wrest an accord at a mid-December summit.

Expressing “regret,” they blamed “a stubborn refusal by a minority of EU governments to talk about a procedure to involve parliament in discussions on the EU financing system.”

One diplomat blamed the collapse on failure to agree “flexibility” for 2011, which would have seen an additional 3.4 billion euros of overdraft-like funds made available; and because of differences on how to debate the development of new “own resources,” which opponents fear means direct EU taxes on citizens and businesses.

The budget now goes back to the drawing board after high-profile lawmakers, led by parliament president Jerzy Buzek, held out resolutely — even if both sides had agreed the principle of a 2.91 percent increase for 2011.

States currently cough up three quarters of the EU’s income, but the bloc’s executive commission will now, probably on Tuesday, present new budget proposals to fill the gap in requirements on top of last year’s 123-billion-euro (170-billion-dollar) wallet.

Even if there is some kind of breakthrough during the December 16-17 summit, a key new EU diplomatic service launching on December 1 and new agencies due to supervise financial markets come January 1 will already face a serious shortfall in funding.

Officials say the European External Action Service will already be short of 25 million euros and the three new financial supervisory agencies another 1.22 million.

And as of now, the EU’s executive commission is forced to plan for monthly budgets matching real 2010 figures.

The schism between EU institutions runs along fault lines that run deep in post-war Europe, with opposition in Britain and the Netherlands particularly virulent.

States used to carving up power amongst themselves staunchly refused to cede to parliament’s demands for a written agreement clearly giving lawmakers a say in determining budgets over the next decade.

These budget negotiations were the first since the EU’s Lisbon Treaty, which handed the parliament decision-making powers on a par with governments, came into force last December.

Lawmakers say they have a direct mandate from half a billion citizens to exercise full oversight on how the EU raises and spends its billions over the next decade.

But bringing his own crusade for budget cuts to Brussels, British Prime Minister David Cameron and the Dutch also rallied Denmark, Finland and Sweden to their cause, a diplomat said.

For the refuseniks, the legislature’s demands trigger a nightmare scenario of direct EU taxes encroaching on state sovereignty.

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