Corrected: In austere times, EU to discuss 6.8 percent budget rise

BRUSSELS Wed Apr 25, 2012 12:10pm EDT

BRUSSELS (Reuters) - The European Commission will risk accusations of double standards on Wednesday when it proposes a 6.8 percent increase in the European Union's budget next year despite calls for fiscal discipline across the bloc.

An EU document shows the executive will seek an increase of 9 billion euros to 138 billion euros ($181 billion).

The Commission says the budget increase is needed to meet prior EU payment commitments, but such a rise is sensitive given it has led calls over the past two years for EU governments to slash public spending to bring the euro zone's debt crisis under control.

Concern within some Commission departments about how the request will be perceived in EU capitals means the figure and how to present it will be discussed by the 27 EU commissioners on Wednesday, ahead of the scheduled announcement.

"Some cabinets were worried that the proposed increase of 6.8 percent in payment appropriations would risk being wrongly interpreted," said the minutes of a meeting of senior Commission officials held on April 23, seen by Reuters.

"The College (of commissioners) should therefore have a political discussion mainly focused on the adequate level of payment appropriations to propose for 2013, and the right way to present this draft budget," the document said.

A spokesman for EU Budget Commissioner Janusz Lewandowski said he was unable to comment on leaked proposals.

But one Commission source said while a rise in EU payments next year was unavoidable, the budget proposal would seek to limit the increase in new EU spending commitments in 2013 to 2 percent, just above the expected rate of inflation.

Commitments are legal pledges by the EU to fund projects and policies over several years, while payments reflect the amount EU governments must contribute annually to cover those commitments.

"Today's commitments by definition are tomorrow's payments. Once the bills arrive you have to pay them, and the Commission has little control over that," the source said on condition of anonymity.

"However, we have more control over commitments, and to avoid member states having to face huge bills in the future, we will ask for an increase in commitments in line with inflation, which is almost like a freeze."

GOVERNMENT BACKLASH

Once finalised, the Commission's EU budget proposals must be jointly agreed by member governments and lawmakers. While the European Parliament usually supports the Commission's spending plans, they are likely to face strong opposition from large governments who are net contributors to the EU budget.

"The UK has been consistent that at a time when member states are tightening their belts, the EU must show budgetary restraint," a British government spokesman in Brussels told Reuters.

In negotiations last year on the EU budget for 2012, governments ultimately saw off proposals from the Commission and Parliament for a 5 percent rise in EU spending, settling on an increase of 2 percent.

Talks on next year's budget are likely to take until December and will run in parallel with more difficult haggling over the EU's next long term budget, for 2014-2020. There the Commission has proposed an allocation of almost 1 trillion euros.

Talks on Tuesday between EU foreign ministers in Luxembourg on the Commission's long-term proposals revealed deep divisions between the biggest net contributors to the EU budget and its main recipients.

Germany, Britain, Sweden and the Netherlands are among the countries seeking to cut at least 100 billion euros from the Commission's proposal, with regional development funding one of the most likely targets for spending cuts.

But poorer member states in central and eastern Europe, who stand to benefit most from regional funding for new roads and other infrastructure projects, said they would oppose any cut in the proposed 336 billion euro budget for such measures.

The Commission has suggested an increase in spending on areas such as research and innovation from 2014 in an effort to boost economic growth and job-creation.

But regional development funding and agricultural spending would together still account for nearly three-quarters of total EU spending up to 2020.

(This story corrected TUESDAY APRIL 24 story to show increase is to 138 billion euro, not by, in second paragraph)

(Reporting by Francesco Guarascio and Charlie Dunmore; editing by Rex Merrifield/Jeremy Gaunt)

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