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EU nations head into tough budget summit

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RAF CASERT | November 21, 2012 02:22 AM EST | AP


BRUSSELS — Everyone's drawing lines in the sand, but the leaders are so far apart they might as well be on different beaches.

The European Union heads into a critical summit Thursday to hammer out a (EURO)1 trillion ($1.28 trillion) budget through 2020 – and it promises to be one of its most bitter fights in years.

Finding hard cash to prop up European unity has become a political quagmire for leaders facing angry, crisis-weary citizens at home. Complicating the task is that any one of the member states can veto a deal, giving each tremendous negotiating clout, with even small Denmark able to thwart heavy-hitters Germany or France.

`'There is a whole bunch of Tarzan-like chest-beating," said Finland's European Affairs Minister, Alexander Stubb.

It all leaves little hope for a quick solution.

`'Now, it looks very unlikely that an agreement will be reached," said Claire Dheret, a policy analyst at the European Policy Center.

At stake is a plan to divvy up the EU spending budget from 2014 to 2020. So far the EU's executive commission has proposed a ceiling of just over (EURO)1 trillion, while EU president Herman Van Rompuy is already seeking the cooperation of spending-shy countries like Britain by offering (EURO)80 billion short of that mark.

`'With less money, we cannot do the same as before," Van Rompuy wrote in the invitation letter he sent to the 27 leaders on Tuesday.

Britain, ever the halfhearted EU member, wants to cut even deeper if possible – arguing that its beleaguered taxpayers shouldn't have to shoulder the rest of Europe's woes.

`'If there isn't a deal that is good for Britain, if there isn't a deal that is available," said British Prime Minister David Cameron, "then there won't be a deal."

Leaders from Copenhagen up north to Madrid and Rome down south are already threatening vetoes for often opposing reasons, and the EU has said the summit might go three days and three nights.

`'Budget negotiations have always been very intense," Dheret said in an interview. `'The problem is that the climate of the negotiations has changed because of austerity."

If agreement cannot be reached this week, there will be other opportunities before 2014. But that's flexibility of the kind that may prove poisonous for the bold leadership Europe needs to turn itself around.

`'Let there be no mistake: the absence of an agreement would be harmful for all of us," Van Rompuy wrote Tuedsay.

Already the Germans are hinting that foot-dragging may be the least harmful solution.

`'If it turns out that Europe still needs a bit more time for discussions, that wouldn't be so bad," said Steffen Seibert, the spokesman of Chancellor Angela Merkel.

If the summit fails to find a compromise, the issue could spill over into a new meeting next month, or into next year. There is no set deadline for a deal but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs. If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 percent increase accounting for inflation.

At the heart of the budget fight are the conflicting vantage points of rich EU countries and poor.

Wealthy nations like Germany, Britain, Sweden and the Netherlands are becoming increasingly stingy about contributing to the common cause, especially if that means bailing out countries like Greece and Spain, which feasted on EU development funds before collapsing under piles of debt.

At the same time, up to 15 poorer nations are exhorting them to continue funding projects to close the wealth gap between the mostly northern and western nations and the southern and eastern members.

The European Commission, the EU's executive, backs more spending, arguing that cross-border initiatives on everything from science to pipelines will help to create the economic growth and jobs that the bloc of a half-billion people needs.

But just about every EU nation has had to cut into parts of its national budget or raise taxes to fund that vision, which has raised the ire of voters. So spending more on Europe has become pretty much anathema among citizens across the bloc.

Cameron captured some of the general mood when he said: `'It is simply not credible to go to Europe and say we have made all these difficult decisions at home but when it comes to the European budget we are going to see it go up and up and up."

Germany and France, the two-stroke engine that has driven EU integration for half a century, also have their demands.

The Germans want to keep a lid on spending, but they are also by no means as uncompromising as the British. They want EU outlays limited to 1 percent of GDP over 2014-2020.

France also knows its priorities, and when it comes to the EU budget, it has long been farming. When Van Rompuy's proposal outlined a reduction in the agriculture budget, it immediately met a firm Gallic "non."

Countries like Sweden specifically seek farm cuts that would slice its share well below the current 40 percent of the budget and instead move more funds into new industries.

`'We need a modern budget for the future," said Swedish EU Affairs Minister Birgitta Ohlsson, "not the fifties."