What Now For EU Budget?
Updated: 10:16pm UK, Friday 23 November 2012
By Adam Boulton, Political Editor
The 27 EU member states did not agree a budget for the next seven years at the summit in Brussels. But David Cameron will be able to go home and tell Eurosceptic conservative backbenchers "so far, so good".
In his own words the Prime Minister "successfully defended" Britain's contributions rebate and rejected a deal which "was just not good enough".
Mr Cameron also insisted that Britain had not been isolated but was joined in its demands for lower spending by other big net contributors including Denmark, Sweden, Finland, Norway and Holland.
This Nordic European grouping also claims the support of the key deal-maker and biggest funder, Germany. But in her public comments Chancellor Angela Merkel was more circumspect, merely noting, as she had since arriving in Belgium, that the gap between the want-mores and the want-lesses was too big to bridge at this meeting.
She and the hapless Herman Van Rompuy, who has the thankless task of chairing these negotiations, have the same message - it is more important to get it right than to rush for a deal.
Mr Van Rompuy now has "weeks" to try to find an agreement. When EU leaders come back to the budget early next year (having put the matter to one side at the next summit in December) they will be on deadline.
If an agreement is not reached then, funding will be rolled over on an annualised basis - bad news for Britain because budgets will automatically increase, and worse news for countries such as Denmark and Holland who have not yet secured their rebates.
So doesn't that mean that all the countries who want more have to do is sit it out? Not quite. Of the 27 member states nine countries are net contributors, including all the Nordic holdouts, and around 15 are significant recipients. Ultimately all the winners are vulnerable, especially if Germany joins in so much as threatening to turn off the tap.
The leaders calling for further cuts all make the same argument - they are imposing austerity at home and it is not acceptable to their voters that the European slice of their budgets simply should be exempted from a squeeze.
The Council President, Mr Van Rompuy, and Jose Barosso his counterpart at the EU Commission probably made a mistake in refusing to table any cuts in the administration budget - pay and perks for bureaucrats. Mr Cameron contrasted this with the "difficult decisions" being imposed on the UK civil service and insisted that the EU could not live "in a parallel world".
But ultimately these are points of principle rather than matters of real significance to national budgets. The UK's government spending now runs to about one trillion euros a year - the EU is arguing about one trillion euros over seven years divided between 27 nations. Of that the "administration" budget is just 6%. Which means that when Mr Cameron talks about saving a billion euros by, for example, stopping automatic promotion of civil servants, he really is talking about a drop in a bucket.
This is perhaps why the economics professor who now is Prime Minister of Italy, Mario Monti, accused Mr Cameron of being an irrational "demagogue". Italy is now in an alliance with France supporting the claims of those who want a bigger budget in the interests of "solidarity". Both Italy and France are net contributors to the EU overall but they are also big recipients of the Common Agricultural Policy, which accounts for some 40% of EU spending.
Perhaps the most significant thing that happened at this summit was that there was no Franco-German axis. Chancellor Merkel and President Francois Hollande took opposing positions.
What's more Germany now seems concerned not to isolate the UK, because of fears that another confrontation could move Britain out of the Union altogether - ceding much greater influence inside to socialist-led France and its Mediterranean allies.
As the European Union scrambles to find a deal Germany, Britain and their North European allies would seem to have the stronger hand - following the time-honoured principle of who pays, plays - provided that their alliance holds together.
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