European leaders yesterday abandoned talks to hammer out the union's next seven-year budget due to fundamental disagreements over how much money should be spent.
Talks will be resumed in the new year, but it is almost certain the budget will be cut from the European Commission’s initial 8.1 billion kroner proposal.
But trimming the EU’s budget won’t be without consequence for the EU’s 27 countries, and not just for the countries that receive more from Brussels than they pay in.
With the slow economy making it hard to secure private investment the likely target of the cuts will be the Connecting Europe programme, which invests in developing European infrastructure such as transport, energy and high-speed digital networks.
According to Lykke Friis, the EU spokesperson for opposition party Venstre, the cuts could affect funding for the planned Fehmarn Tunnel to Germany, and the Kriegers Flak windpark in the Baltic Sea which would provide energy to Germany, Sweden and Denmark.
In addition to threatenening the infrastructure projects, the breakdown of talks sent a bad signal, according to Friis.
“We are in the middle of a debt crisis,” Friis told the Ritzau news bureau. “We are standing far apart from each other, not least on the banking union. What we don't need is a long-lasting budget crisis.”
The decision to target to the infrastructure programme was also criticised because investment in European infrastructure is seen as a guaranteed way to create jobs.
“The government should make sure that the EU budget does not cut positions that support lasting growth,” Karsten Dybvad, managing director of business lobby group Dansk Industri, told Jyllands-Posten newspaper.
He added that as the budget now looked, these investments were not highly enough prioritised.
“Given the challenges faced by Europe, it’s unambitious,” he said.
At the heart of the budget negotiations is a conflict between countries such as the UK, which want the budget to be cut, and countries such as Portugal and Romania, which are pushing for increased regional investment to boost growth.
After talks broke down, Herman van Rompuy, the EU president, stressed that the budget needed to address Europe’s stagnating economy.
“That's why in my proposal the spending on competitiveness and jobs is more than 50 percent higher than in the period 2007-2013,” Van Rompuy stated in a press release. “Here especially this budget is not a zero sum game. Growth in one country benefits all.”
Van Rompuy added that the breakdown in talks was not unusual given how many interests need to be balanced in the budget.
German Chancellor Angela Merkel also stressed afterward that the talks were constructive and that by the time they resume there is a good chance a compromise will be found.
“There is a potential for an agreement,” Merkel said according to EU news website Euractiv. “The unanimous view of the 27 leaders is that we can reconcile differences and bridge differences of opinions.”
Many EU countries are fighting to have their contribution to the budget discounted, among them Denmark, which has already budgeted a one billion kroner discount into its national budget for next year.
In the run-up to the negotiations, PM Helle Thorning-Schmidt (Socialdemokraterne) said she would veto a buget that did not contain the rebate, and after yesterday's talks she conceded that she wasn’t able to secure the demand at the meetings.
“We didn’t get a deal so we didn’t get a discount,” Thorning-Schmidt told the press. “We talked mostly about expenses rather than income, we expected that, it doesn’t change our demand, which has been the same all along.”