EU leaders seen shunning growth for subsidies in budget deal

Thu Feb 7, 2013 9:38am EST
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By Charlie Dunmore

BRUSSELS (Reuters) - European Union leaders began two days of high-pressure talks on a long-term budget on Thursday, with efforts to refocus spending on growth likely to be thwarted by demands for farm subsidies.

The negotiations on the 2014-2020 budget, which will assign nearly 1 trillion euros of spending, pit the EU's more fiscally conservative northern countries against those in the south and east that want money for infrastructure and agriculture.

Arriving for the talks, German Chancellor Angela Merkel described the balancing act that EU leaders will have to make.

"We have to be careful with the way we spend, but also show solidarity between net contributors and recipients," she told reporters, referring to those who pay the most towards the budget and those who get the most back from it.

Efforts to strike a deal at the last summit in November failed, and diplomats say that if an agreement isn't reached now, it may not be possible before late 2014 or even 2015.

That is likely to focus minds and in the build-up to the summit consensus was 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 favor fiscal restraint.

But the bulk of the spending, around 40 percent, would still go on agriculture and related farm subsidies.   Continued...