Fear of failure looms over EU summit - Sky News Australia

Updated: 05:56, Friday November 23, 2012

An EU budget summit seemed set for trouble before it began as leaders were to start two days of talks to agree a trillion-euro budget that has bitterly divided a 27-nation union already mired in crisis.

European Union officials were scrambling to find an all but impossible compromise on the 2014-2020 budget that could successfully move richer nations looking for cutbacks closer to poorer ones who look to Brussels to prop up hard-hit industries and regions.

'All the talk is only about cuts,' said the head of the EU executive Jose Manuel Barroso in an impassioned speech before the European parliament on Wednesday. 'No one is discussing the quality of investments, it's all cut, cut, cut.'

Much of Europe is in or dangerously close to recession and austerity-driven nations led by British Prime Minister David Cameron are demanding huge cuts in EU spending to match belt-tightening at home, raising the ire of cash-strapped nations to the east and south.

'It's quite wrong for EU to propose more spending,' Cameron declared on Thursday as he arrived at the European Council building where the summit will be held.

He also vowed to fight efforts to cut the rebate Britain has got every year since 1984 when then prime minister Margaret Thatcher argued that London was paying too much towards the bloc.

The rebate was worth 3.6 billion euros ($A4.49 billion) last year.

Central to the upcoming two-day battle are development funds, the billions of euros outlayed each year to the EU's newer and poorer entrants so they may make up the economic lag with rich neighbours.

These poorer countries, mostly net beneficiaries of the EU budget, have pledged to fight dearly to preserve funds that eurosceptics to the west and north hint are wasted, generating little real growth.

Eight of the net contributor nations - Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden - have banded together to demand spending cuts, though they are far from being on the same page on what should go or by how much.

Lined up against them are 15 nations who are net recipients, most often of the so-called 'cohesion funds' used to help poor regions catch up. This is the second biggest budget item after the CAP.

Chaired by Poland and Portugal, the group includes Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Romania, Slovakia, Slovenia - and most recently, once mighty Spain.

Farm and fishing subsidies, funnelled through the EU's huge Common Agricultural Policy, are another bone of contention, especially for France which is the biggest beneficiary by far of what is the budget's biggest line item.

French President Francois Hollande has vowed to fight to keep France's prized farm subsidies, which is viewed as a red line not to be crossed by the powerful agricultural lobbyists in Paris.

Germany, the Netherlands, Sweden and Austria are also demanding to keep their rebates and Denmark is seeking one too.

Before the start of the summit, EU president Herman Van Rompuy was to sit down with individual heads of state and government to finesse a one-size-fits-all compromise.

'Let there be no mistake: the absence of an agreement would be harmful for all of us,' Van Rompuy said in a summit invitation letter to the EU's 27 leaders.

Britain had appeared to warm towards a proposal made last week by Van Rompuy for a 75-billion-euro decrease in the 1.047 billion euros ($A1.31 billion)- budget that would leave Britain's rebate intact.

But Cameron, who met with Rompuy after arriving in Brussels on Thursday, told Britain's parliament he would be 'fighting incredibly hard for a good deal'.

German Chancellor Angela Merkel on Wednesday said she did not 'know if we will have a definitive deal' by Friday.