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BRUSSELS: A compromise proposals on the European Union’s long-term budget, cutting more than ¤50bn ($64.5bn) from the original blueprint, ran into a crossfire of criticism yesterday from governments on both sides of the spending debate.
The plan by the EU’s Cypriot presidency, sent to capitals late on Monday, recommended the deepest cuts to infrastructure spending in the poorest member states to reduce the total bill, with a less drastic reduction in farm subsidies.
The document will form the basis of negotiations to seek a deal on the seven-year budget for 2014-2020 in time for what promises to be a marathon summit of EU leaders on November 22-23.
But it angered both richer Western states keen to minimise their contributions as they struggle to reduce national debt in the shadow of the euro zone crisis, and Eastern newcomers who rely heavily on EU funds for their future economic development.
“In times of austerity, the EU budget must not grow. We need to cut three or four times as much as in this proposal to stabilise member states’ contributions,” said Swedish Minister for EU Affairs Birgitta Ohlsson. Stockholm is a net contributor.
“No deal will be possible on the basis of cuts of only ¤50bn,” she added.
Sweden, Germany and Britain have demanded cuts of ¤100-200bn to the European Commission’s proposed ¤1 trillion total, slightly more than one percent of the 27-nation bloc’s gross domestic product. By contrast national government spending accounts for between 40 and 56 percent of member states’ GDP.
A diplomat from Poland, biggest net recipient of EU funds, criticised Cyprus for concentrating solely on wielding the axe.
Polish Prime Minister Donald Tusk said he had warned Britain, which seeks the deepest cut in spending, that if there was no deal, the current EU budget would remain in force provisionally with two percent added each year for inflation.
“We will try to persuade the British that a compromise would be cheaper for the UK,” Tusk told reporters in Warsaw. “We will be looking for smart compromises. Here in Poland we will need to see what is beneficial for us and acceptable to others.”
Cyprus, which holds the bloc’s rotating six-month presidency, said the cuts outlined so far were just a start and deeper reductions would be needed to reach a final deal.
“Further reductions will require even bigger trade-offs and the need to prioritise between policies and programmes,” it said.
As part of its proposal, Cyprus trimmed a further ¤58bn of spending in areas such as nuclear fusion research and crisis response that the Commission had kept off the main budget, moving some of it back onto the EU’s books.
The compromise cuts the EU’s seven-year regional development budget by about ¤12.5bn compared with the Commission’s original plan.
By contrast, spending on agricultural subsidies, of which France, Italy and Germany are the biggest beneficiaries, would only fall by about ¤5bn under the compromise. Direct payments to farmers would total more than ¤277bn over seven years.
About three-quarters of the current budget is spent on farm subsidies (40 percent) and airports, motorways, bridges, rail tracks and other infrastructure projects (35 percent).