EU budget talks collapse ahead of summit

The budgetary deadlock ran simultaneously with another high level meeting in Brussels for EU Heads of Government with a pre-summit agenda of what is termed as the 'Friends of Cohesion' group.

Prime Minister Lawrence Gonzi, who attended the meeting, said that the issues discussed are "quite complicated" and states like Malta, considered to be net recipients of EU funding are facing resistance by bigger states to pay up their final tranche of the expiring  budget, and agree to another new one.

Chaired by Poland and Portugal, the 'Friends of Cohesion' group includes Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Romania, Slovakia, Slovenia and most recently, Spain.

Their opponents, eight of the 11 net contributors, want a €100 billion cut on the European Commission's proposed €1.03 trillion budget for 2014-20, which is a five percent from the current one.

They argue that when many member nations are being forced to make cutbacks that the EU budget should also be cut back in real terms.

The group includes Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden.

Malta is insisting for its share of the already promised funds under the current EU Budget, as it needs to honour its commitments on public contracts part-financed by the EU, while also insisting on its right to benefit from the Cohesion Funds in the next EU Budget as the Treaties provide.

Unpaid bills

At the centre of the row are €9 billion euros worth of unpaid bills for 2012 covering a range of worthwhile causes -- Europe's Erasmus student exchange programme, research funds, humanitarian aid and cash for rural development.

The dispute is shedding serious doubts on the outcome of a key EU leaders summit scheduled to be held next week in Brussels.

"If they can't agree to pay the bills, what can they agree to?" said Hannes Swoboda, who heads the parliament's socialist group.

The one exception was an agreement to dish out €670 million set aside to compensate Italian earthquake victims.

In a statement issued three hours before EU finance ministers also met to discuss the 2013 budget, the European parliament refused to attend on grounds that EU nations were depriving Europe's needy of key funds and failing to honour commitments.

"These funds are needed for the European Union to respect its legal obligations, that is to pay for bills incurred for goods, works and services delivered," said the parliament's president Martin Schulz.

New budget

The EU executive, the European Commission, will now have to draw up a new 2013 budget proposal and seek an agreement by the end of the year.

The stalemate sets the scene for next week's summit, with battle-lines taking shape between EU States, while  British Prime Minister David Cameron flew to the The Hague and Rome in a bid to garner support from leaders Mark Rutte and Mario Monti ahead of the summit.

€138 billion needed

For 2013, the European Commission and European Parliament are seeking to obtain. €138 billion to bolster growth and jobs in the slowing economy. The figure represents a 6.8 percent increase on the previous budget.

The Commission is arguing that the lack of budget deal will seriously undercut any chance for economic growth, worsening the very problems many countries say must be fixed through more belt-tightening.

If there is no agreement on the 2013 budget, the EU would base its spending for next year on the 2012 programme, rolled over on a monthly basis.