Battle over EU budget turns ugly

Negotiations over the European Union budget turned ugly on Wednesday as a drive to ramp up 2013 funding ran into a push by national governments to impose a decade of austerity on Brussels. European Commission president Jose Manuel Barroso confirmed his executive wants a budget next year of 138 billion euros ($182 billion) -- an increase of 6.8 percent to 9.0 billion euros, way above average inflation. "We also need investment for growth," Barroso told a press conference, suggesting the EU would focus its spending on areas generating better returns. "And precisely this budget is a response to this concern," he said. Diplomats though warned that several governments including Britain, France and Germany had already signalled this level was "unacceptable" at a time when national governments are forced to cut costs. The leader of the European Conservatives and Reformists group in the European Parliament, English MEP Martin Callanan, said the demand was "simply out of touch with the real world." A frustrated Barroso hit back: "Does the public in the UK know that the British government is arguing for increased expenditure in ITER," referring to a nuclear research project costing many billions. A British government official said that referred to a hole in funding in 2010 that London agreed to plug alongside France, Germany, the Netherlands and Sweden, on condition other cuts were made. Alongside the former Portuguese prime minister, the European Parliament's German Socialist head Martin Schulz meanwhile said the return of big banking bonuses was a bigger problem. The London goverment could relieve the pressure on its contributions by backing proposals for an EU-wide financial transactions tax, Schulz stressed. The EU budget is always chaotic to negotiate: a big bloc led by France insists spending on agriculture is sacrosanct; while another led by Poland maintains so-called "cohesion" funding, or investment in poorer regions, must be kept high. Between them, these two primary EU policies account for 80 percent of bloc spending. After bruising battles that got worse during the debt crisis, the EU's budget for 2012 was agreed at a modestly-up 129 billion -- and in February, the EU executive sought only 131.67 billion for 2013. The Commission says the extra money now demanded next year is needed to settle unpaid bills from its seven-year budgetary cycle, drawing to a close with 2013. Diplomats say the "substantial" jump is a response to a push by bigger member states who want to slash 100 billion euros from EU spending during the 2014-2020 budgetary cycle. Poorer eastern EU countries that normally benefit most from annual grants aimed at levelling out facilities across the continent are leading the fight to maintain levels of investment. For these countries, according to a joint statement, "we ought to focus on those instruments that promote growth, jobs and investment." Countries among this group -- almost half the EU membership -- argue that deep cuts going forward would only exacerbate the traditional wealth gap among old and new, western and post-Soviet rivals. "2013 is a test-case for the rest of the decade," said a diplomat caught in the middle. "France has been hawkish so far," the diplomat said, referring to the country's demands on budget cuts. "Francois Hollande could undo that a bit were he to win the decisive round in the presidential election, but I'm not so sure he would be able to change track," this negotiator added. In the first skirmishes earlier in the spring, before a Commission forecast of an earlier-than-anticipated pick-up in the economy next year, EU budget commissioner Janusz Lewandowski was working off projections based on 2.0-percent annual inflation. Already on that basis the 129-billion-euro 2012 budget would translate into 142.5 billion in 2017, producing an overall outlay of more than a trillion euros between now and the end of the decade.