Financial News

  • 23 November 2012, 16:06

EU Budget: 'Long Way To Go' Before Deal

David Cameron has demanded billions in pay and pension cuts from the EU's civil service in support of austerity-hit workers across Europe.

Ahead of a crucial budget summit last night, he presented EU heads with a paper setting out how Brussels could slash at least six billion euro (4.8bn) off its staff costs at a stroke by upping retirement ages, lowering pensions and trimming lavish salaries.

President of the European Council Herman Van Rompuy and President of the European Commission Jose Manuel Barroso were caught by surprise during the private talks with the Prime Minister.

Mr Cameron's position was to impose a real-terms freeze in spending in common with national public sector cuts, including a solidarity gesture by targeting the 60bn euro-a-year (48bn) administrative budget which pays the 40,000-plus civil service behind the Commission, Council and European Parliament.

Following the meeting Downing Street said there was "a long way to go" before EU leaders could agree a long-term budget.

A Downing Street spokesman said: "The Prime Minister set out our position that while the latest proposals were a step in the right direction, they did not go far enough and that we think more can be done to rein in spending."

Mr Cameron said he would be fighting "very hard" to secure a good deal for British taxpayers and to keep the rebate negotiated by Margaret Thatcher in the 1980s.

"These are very important negotiations. Clearly at a time when we are making difficult decisions at home over public spending it would be quite wrong - it is quite wrong - for there to be proposals for this increased extra spending in the EU," he said.

He has welcomed proposals from Mr Van Rompuy which would deliver a small real-terms cut in EU spending commitments, but has made clear he is unhappy with other details of the package, which demands a reduction in the 2.9bn UK rebate.

The start of the meeting was delayed until mid-evening as the rest of the EU's leaders held their own "confessionals" throughout the day, setting out their positions on how much cash the EU should be given to pay for policies between 2014 and 2020.

A pre-summit compromise is already on offer - a seven-year budget "envelope" of 973bn euro (785bn) for 2014/2020, a cut of nearly 5bn euro (3.8bn) compared with the 2007/2013 ceiling.

The move was seen in Downing Street as being in the right direction - although the "cut" is in a spending ceiling which officials say has not been reached.

It is also above the 886bn euro (712bn) originally pitched by the Treasury as in line with the real-terms freeze Mr Cameron wants.

But in the complex world of EU budget economics, with financial "commitments" different from "payments", a range of calculation options, rebates for some countries, and contributor and beneficiary member states, Mr Cameron and his colleagues have plenty of scope for claiming summit success.

The Prime Minister's allies for budget belt-tightening, including Sweden and the Netherlands, have demanded hefty financial cuts.

Germany, France, Finland and Austria want to freeze the maximum Brussels can draw from member states every year - leaving plenty of scope to argue over the actual spending figures within the ceiling.

And 15 countries, led by Poland, are backing budget increases, not least to preserve the scale of cash aid they receive as "net beneficiaries" from the EU kitty.

Britain is arguing for a shake-up in EU spending priorities, cuts in agriculture spending and subsidies - fiercely defended by France - and cuts in EU staff levels and pay and perks, in line with national civil servants.

But the European Commission still insists that a spending increase is necessary, not least to pay for policies already agreed by member states.

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