October 28, 2012 / 8:00 PM / 7 years ago

Governments to debate 50 billion euro cut to EU budget

BRUSSELS (Reuters) - European Union governments will debate a cut of at least 50 billion euros this week as the starting point for negotiations on the bloc’s proposed 1 trillion-euro ($1.3 trillion) long-term budget, a source familiar with the issue said.

The cut will be proposed in the latest EU negotiating text on the bloc’s spending plan for 2014-2020, but is unlikely to be deep enough to satisfy Britain, Germany, France and other net budget contributors.

They want strict limits on EU spending to reflect the austerity imposed by national governments to reduce debt, and called for cuts of 100-200 billion euros to the total proposed by the EU’s executive, the European Commission.

The proposal is also likely to anger Poland and other former communist EU countries who are the major beneficiaries of EU funds, and oppose any cuts to the Commission’s blueprint which they argue is vital for their future economic growth.

“As I see it now, the reduction from the Commission proposal will be 50 billion euros plus. That will be the basis for negotiations,” said the source, who spoke on condition of anonymity.

The new EU negotiating text will be the first to include firm figures, and marks the start of the decisive phase of talks between governments hoping to reach a deal at a November 22-23 summit of EU leaders.

The text will be used as the basis for bilateral talks ahead of the summit between governments and European Council President Herman Van Rompuy, who will chair the November talks.

In order to generate the proposed savings, the revised document will specify cuts to all areas of EU spending including agriculture, infrastructure investment and research.

That could create rifts between countries calling for budget cuts, with France keen to exclude farm spending from any reduction, while Britain, Sweden and others want a higher share of EU spending on research and other measures to boost growth.

The text is unlikely to include clear proposals on the fate of Britain’s multi-billion euro annual budget rebate, which the Commission and others would like to do away with by 2020.

The issue is expected to be left for EU leaders to haggle over at their November meeting, at which Britain’s Prime Minister David Cameron has threatened to use his veto if the rebate is not maintained.

At about 1 percent of the bloc’s GDP, the EU budget is relatively small compared with overall public spending in Europe, but negotiations often lead to bitter disputes as countries seek to maximize their returns.

Around three-quarters of EU funds are currently spent on subsidies for farmers and on building new motorways, airports and other infrastructure in the bloc’s poorest regions. ($1 = 0.7733 euros)

Editing by Robert-Jan Bartunek and Jon Hemming

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