* Consensus on structure of 2014-2020 budget narrows ahead
* Deal expected to produce slight fall in overall spending
* Farming, infrastructure spending to remain top items
* Status quo seen preferable to lack of a deal
By Charlie Dunmore
BRUSSELS, Feb 7 European Union leaders begin two
days of talks on a long-term budget on Thursday, with efforts to
refocus spending on growth likely to be thwarted by demands for
farm subsidies as pressure to reach a deal grows.
The talks on the 2014-2020 budget, which will assign nearly
1 trillion euros of spending, will pit the EU's more fiscally
conservative northern countries against those in the south and
east of Europe that want money for infrastructure and
Efforts to strike a deal at the last summit in November
failed, and diplomats say that if an agreement isn't reached in
coming days, one may not be possible before late 2014 or even
That may focus minds and, ahead of the summit, consensus is
forming around a spending framework worth around 950 billion
euros over the seven years - equivalent to around 1 percent of
the EU's annual GDP but lower than the long-term budget that is
about to end.
That would reflect the region's gloomy economic backdrop and
represent a victory for the likes of Britain, Germany and the
Netherlands, which favour fiscal restraint.
But the bulk of the spending, around 40 percent, would still
go on agriculture and related farm subsidies.
That is a frustration for many northern European states that
want to see a shift towards research and investment to kickstart
growth. Those ambitions will have to be put to one side if they
are to at least get a deal that reduces spending.
Two of the biggest recipients of farm spending are France
and Italy, both of which have hinted they could block the budget
unless their appropriations are maintained. The budget needs to
be unanimously agreed among all 27 countries.
British Prime Minister David Cameron has also said he will
block an agreement unless there is a sufficient reduction in
spending, although he has not said explicitly to what level.
Smaller countries such as Denmark, the Czech Republic,
Slovakia and Austria have also set out firm positions, making it
almost inevitable that the negotiations will be drawn out and
potentially divisive. Talks could even run into Saturday.
While November's attempt to strike a deal failed, there was
less of the public squabbling that normally accompanies
The chairman of the talks, European Council President Herman
Van Rompuy, will be hoping for a similar level of engagement as
the summit gets under way at 1630 GMT.
In recent weeks, Van Rompuy has been in touch with every EU
leader to assess where the contours of an agreement may lie. He
will present them with his compromise proposal as they sit down
for negotiations, an effort to prevent the numbers leaking out
beforehand and scuppering an agreement.
In November, Van Rompuy began talks by reducing the original
budget proposal from the European Commission by 80 billion
euros, cutting the headline figure to 972 billion.
Thursday talks will resume from that figure, although it
will not be a simple question trying to bring the number down by
cutting programmes, since the budget also involves delicate
negotiations over rebates - amounts countries get reimbursed
after they have made contributions.
There is also a difference in how countries interpret the
budget figures, with some focusing on commitments - the maximum
amount that could be spent on projects or programmes - and
others concentrating on payments - the sums actually spent.
Payments are always less than commitments, and any deal may
ultimately rest in the gap between the two.
If there is to be a deal in the coming days, the expectation
among diplomats is that it will require a reduction in
commitments of in the region of 15-20 billion euros, pulling Van
Rompuy's headline figure down to around 950 billion.
But in terms of payments, the figure could end up closer to
900 billion, an amount that negotiators hope will satisfy
Cameron and others adamant about spending restraint.
The other major fight will be over rebates, with Britain the
biggest recipient. Even opponents of its refund - including
France, Italy and Spain - have so far only put up token
resistance, and there is no chance of it being cut.
France and Italy, which in theory could qualify for a
rebate, want payments to them for agriculture and regional aid
maintained or boosted if they are to play ball on rebates.