Britain, France, Germany to demand EU budget freeze

BRUSSELS Fri Dec 17, 2010 10:03am EST

BRUSSELS (Reuters) - Britain, France, Germany and other European Union countries will publish a letter on Saturday that calls for a freezing of the EU budget at least until 2020, British Prime Minister David Cameron said on Friday.

"All over Europe, countries are tightening their belts to deal with their deficits. Europe cannot be immune from that. We need to see real budgetary restraint from 2014," Cameron told a news conference after an EU summit on Friday.

Cameron used the summit, which agreed on an EU treaty change paving the way for a permanent euro zone financial rescue scheme, to drum up support for a leaner long-term EU budget. This irked EU net recipients from central and east Europe, such as Poland.

Next year's budget is worth 126.5 billion euros, with more than 40 percent of it going on agriculture and a third on aid to poor regions.

The EU's 27 countries will start talks in mid-2011 on the long-term budget, which runs from 2014 until 2020 or longer.

"Tomorrow, Angela Merkel, Nicolas Sarkozy and I, together with a number of other partners, will publish a text ... to put a firm marker for these negotiations (on the EU budget)," Cameron said. "The text to be published talks about at least a real terms freeze for that period."

A draft of the letter, obtained by Reuters, said EU budgets post-2013 should increase no more than the rate of inflation. With high economic growth and low inflation, that could mean an effective cut in the budget over time.

CENTRAL, EAST EUROPEANS ANGRY

Some diplomats said the British demand would also be supported by the Netherlands, Sweden, Finland and Austria.

The letter could be bad news for many poorer EU countries from central and eastern Europe, such as Poland, Bulgaria and Romania, as it could signal efforts to trim the large aid funds they receive from the bloc to modernize their poor regions.

Polish Prime Minister Donald Tusk said his country would resist attempts to cut the EU budget.

"What is the most important from our point of view is for the budget not to be reduced significantly, because we believe the funds flowing to Poland and other countries help us fight the crisis," Tusk said on Thursday.

He took cheer from the fact that despite Cameron's efforts, the summit's conclusions did not make any reference to cuts.

One diplomat said Britain has scaled down its demands as it initially wanted to trim the budget to 0.85 percent of the bloc's output, compared with the current 1 percent.

"I don't think it is a big victory for Cameron. The letter could have been much stronger and it is not talking about significant cuts," the diplomat said.

The EU's costly farm subsidies will be another contentious issue in the debate. They will be defended by France, a major recipient.

Cameron dismissed suggestions by some media and diplomats that he had clinched a deal with Sarkozy whereby Britain will support keeping EU farm subsidies in exchange for London maintaining its rebate from EU coffers, which was won by former prime minister Margaret Thatcher in 1984.

"There is no backroom deal, no secret agreement," he said.

(Editing by Patrick Graham)

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