EU budget cuts must spare growth: France

PARIS Mon Nov 19, 2012 2:11pm EST

European Affairs Minister Bernard Cazeneuve attends the summer meeting of the French Socialist Party in La Rochelle, western France August 25, 2012. REUTERS/Stephane Mahe

European Affairs Minister Bernard Cazeneuve attends the summer meeting of the French Socialist Party in La Rochelle, western France August 25, 2012.

Credit: Reuters/Stephane Mahe

PARIS (Reuters) - European Union leaders must avoid cuts to the bloc's 7-year spending plans that would damage fragile economic growth, France said on Monday, three days before a summit where Britain will lead calls for sharp budget reductions.

European Affairs Minister Bernard Cazeneuve told Reuters that France could not accept proposals to cut EU farm subsidies and vowed to push for a review of the EU budget rebate enjoyed by Britain and other northern nations.

His comments underlined just how far away from a deal the 27 EU nations remain ahead of talks in Brussels starting Thursday at which Britain, Germany and Sweden want up to 200 billion euros ($256.30 billion) shaved off the 1-trillion-euro 2014-2020 spending plan proposed by the European Commission, the EU's executive.

"We want Europe to have a good budget and at the same time our country's contribution must not endanger our commitments to wind down public deficits," Cazeneuve said of France's goal to cut its net borrowing from a current 4.5 percent of output.

"(EU) budget cuts cannot be the only aim of the negotiation. Europe also needs a budget which allows it to achieve growth," said Cazeneuve, speaking after data last week showed the 17-member euro zone had entered its second recession since 2009.

Cazeneuve reaffirmed France's opposition to a draft accord issued last week by EU President Herman Van Rompuy cutting some 25 billion euros from the Common Agricultural Policy (CAP) of which French farmers have long been the biggest subsidiaries.

"The CAP is not there just to give room for manoeuvre ... It supports an agro-food sector which generates huge growth and contributes enormously to Europe's trade surplus," he argued.

"The same goes for the cohesion policies which finance transfers of technology and equipment and so support growth," he added of mooted cuts to EU funding for poor regions which are likely to face tough opposition in southern and eastern Europe.

VETO THREAT

Britain's David Cameron has threatened to veto the 7-year budget outright, saying the EU should limit spending in light of austerity cuts being made by national governments as part of efforts to allay Europe's three-year sovereign debt crisis.

In another bone of contention, Cameron will defend the 3.6-billion-euro rebate from EU funding secured by his predecessor Margaret Thatcher in 1984 and to which France has long objected.

"We think the rebates should be reviewed - they are neither clear, transparent nor fair," Cazeneuve said. Germany, Sweden and the Netherlands also benefit from smaller EU rebates.

With pressure mounting from Eurosceptics within Cameron's conservative party for him to demand deep cuts, EU officials are studying ways to sidestep a UK veto that would throw the bloc's spending plans into chaos just as it aims to step up efforts to overcome a debt crisis.

Diplomats say that pushing through an EU accord with just 26 of the bloc's 27 states would be legally complicated but could be a preferable alternative to years of deadlock.

"That is not something we would want, we are acting in such a way that it does not come about," Cazeneuve said, when asked whether an accord reached with just 26 states was possible.

"At the same time, Europe needs to have a budget to look forward to. We'll have to see what the situation is at the end of the summit." (editing by Ron Askew)