Germany floats ‘plan B’ – a budget deal without Britain

Merkel November summit 2012.jpg

Germany has raised the pressure on British Prime Minister David Cameron to seek an agreement on the EU's long-term budget at a summit in Brussels today (23 November), by floating an alternative deal that would sideline Britain and neutralise its veto.

EU sources have fleshed out reports circulating last week about a plan to sideline the United Kingdom from ongoing budget talks, as Cameron threatened to veto a deal on the EU budget.

The plan, a last-resort option, originated in Berlin two weeks ago according to a reliable EU source, who spoke to EURACTIV on condition of anonymity.

>> Read: Officials seek ways to bypass Britain's EU budget veto threat

It is aimed at forcing Cameron back to the negotiation table after European Council President Herman Van Rompuy tabled a revised proposal last night which kept the EU's overall spending ceiling unchanged, at €973 billion over the next seven years (2014-2020). 

German Chancellor Angela Merkel told reporters after a first day of mostly one-on-one meetings that a deal this week seemed unlikely as positions were still too far apart.

"I believe that we will move forward a little tomorrow but I have my doubts that we will achieve a result," she said. "There is a high likelihood of a second stage."

If confirmed today, the 'plan B' would work in two steps.

  • First, EU leaders, recognising the impossibility of finding an agreement at 27, would issue a statement at today's meeting saying budget talks will resume in January 2013, at another summit.
  • In the meantime, they would reach a political agreement on the bloc's long-term finances – without the UK – and confirm it at the January summit.

Although not an official decision, the political agreement would allow the EU to continue funding itself "as if the MFF had been agreed," the source said, referring to the bloc's long-term budget, the Multi-annual Financial Framework.

The idea, which emanated from Berlin, was approved by Paris although the French had reservations, according to the same source. Crucially, Sweden and the Netherlands, which were initially reluctant, would now be willing to come on board.

Berlin lawyers have scrutinised the deal in detail and believe that the move would not fall into an EU act that could be challenged before the European Court of Justice, leaving Britain isolated.

Herman Van Rompuy tables revised budget proposal

The compromise tabled by Herman Van Rompuy last night restored about €8 billion from earlier farm spending cuts, in an effort to win France's approval. In a gesture to Poland and other Central and East European states, the revised blueprint also restores more than €10 billion for cohesion funds for poorer regions.

The total reduction from the original European Commission proposal is about €80 billion, still too little for Cameron, who came under intense pressure from his Parliament to deliver a real terms cut in the EU budget.

British officials have refused to give precise figures, but the cuts are unlikely to be enough to satisfy Britain, which has called for reductions in the range of €100-200 billion from the European Commission's original blueprint.

Van Rompuy's room for manoeuvre to make deeper cuts is limited however by the demands of other EU countries, some of which have called for a more ambitious EU budget.

Up to 11 countries have until now threatened to wield a veto on the EU budget if their demands were not met.

'What the hell is happening with Britain?'

EU officials accept that Cameron needs some kind of gesture if he is to win the support of Britain's Eurosceptic Parliament. Any proposal to reduce the British rebate for instance may have to be abandoned to win Britain's backing at the summit.

But another British veto, less than a year after Cameron blocked a fiscal discipline treaty in the eurozone, would further isolate Britain in Europe and could increase pressure for it to leave the EU.

"Many countries are asking themselves what the hell is happening with Britain? Is it on its way out? In which case, why should we make major concessions?" said one EU official at the summit, speaking on condition of anonymity.

At roughly €130 billion a year, the EU's annual budget is equivalent to around 1% of EU national wealth, or €244 per EU citizen.

The European Commission proposes raising it to an annual €146 billion over the next seven-year period (2014-2020), or €1.025 trillion in total. But austerity-minded national leaders want a much leaner spending plan.

>> Read: EU budget 2014-2020: The €1 trillion deal

  • 23 Nov.: Second day of European Council meeting

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