The EU’s search for a new budget foundered on Friday night after a near-30 hour summit ended with member states unable to bridge deep divides over how the bloc should finance itself for the coming seven years.
Talks on the bloc’s €1tn budget in Brussels abruptly ended at 7.21pm after rival camps declared themselves to be at an impasse over the scale of cuts needed in the upcoming multiannual financial framework, and over the extent of rebates that will be pocketed by five rich EU states.
European Council president Charles Michel called a halt to discussions without any immediate plan for when to make a fresh attempt at a deal. The continuing delays to the budget risk triggering interruptions to EU spending programmes at the beginning of next year, and will complicate the already difficult task of getting through the commission’s ambitious legislative agenda for 2020.
Leaders are struggling to push the negotiations forward because of serious rifts over how to fill the €60bn-€75bn funding gap created by Brexit. Net payers are being asked to assume a bigger burden over the seven-year period starting in 2021, while net recipients face tighter spending programmes in areas such as cohesion spending for regional development.
“We did not manage to reach an agreement, because, and we have to say it, there is not unanimity to back our ambitions with means,” said France’s Emmanuel Macron. “I deeply regret this.”
Mr Michel convened the summit this week in the hopes of concluding a process that has been drifting for nearly two years. Last Friday he presented a new framework that attempted to wear down some of the opposition that has sprung up among net recipients in central, eastern and southern Europe who are particularly reliant on cohesion or agricultural funds.
His so-called negotiating box suggested reducing planned cuts to regional aid funds to bring on board poorer countries in central and eastern Europe. But some diplomats complained that the strategy had backfired by failing to do enough to accommodate the biggest net contributors to the budget.
These comprise Germany and four so-called frugal states — Sweden, the Netherlands, Denmark and Austria. Mr Michel’s opening proposal on Thursday faced implacable resistance from the “frugal four”, who have insisted that the plans will leave them facing an unacceptable increase in their contributions. For the last two years, they have pushed to retain prized rebates they receive on their fees — worth €6.4bn in 2020 — and to cap the budget at no more than 1 per cent of the EU’s gross national income.
One “frugal” diplomat said Mr Michel and the net receivers “weren’t taking us seriously”. “They assumed we’re all bluffing. But we don’t know how to bluff.” Sweden’s prime minister Stefan Lofven said his country could not accept a “dramatic increase” of our fees. “That is out of the question.”
The frugal governments’ most powerful ally was German chancellor Angela Merkel, who also demanded that her country’s rebate be retained. Following an initial exchange at the summit table on Thursday afternoon, Mr Michel embarked on a marathon series of one-on-one meetings with leaders that lasted past 5am.
Leaders waiting to sit down with the council chief dined on Iberian pork and “tiramisu with a twist”. Mr Macron headed out to a local brasserie, while Ms Merkel went back to her hotel.
By Friday morning it was clear that little progress was being made. Danish prime minister Mette Frederiksen told waiting reporters: “I don’t think we are going to reach an agreement.” Her gloomy assessment was echoed by Romanian president Klaus Iohannis.
In a bid to inject energy in the talks, Mr Macron and Ms Merkel met with frugal nation leaders and emerged with some tentative ideas on how to reconfigure Mr Michel’s plans — including over €20bn of budget cuts. The commission then stepped forward with a revised paper that pared those cuts back to €10bn in an attempt to keep all sides on board.
However a terse final 25-minute discussion between leaders early on Friday evening was enough for all parties to realise that the game was up. Portugal’s premier Antonio Costa — who spoke on behalf of the 17 poorer countries that receive development funds — opened the discussion and emphatically declared that the summit could not continue. The compromise from the commission was “not viable” for a majority of member states, he said, according to diplomats in the room.
Mark Rutte, the Dutch prime minister and ringleader of the frugal alliance, also dismissed the offer. He insisted the net payers would cough up no more than 1 per cent of GNI and demanded more generous “structured” rebates for the Netherlands, Austria, Sweden, Denmark and Germany. “It was absolutely insufficient,” Mr Rutte told journalists after the summit.
Mr Macron delivered the harshest words around the table, saying the final compromise only served to divide the room into two rival camps. “I do not think it is a good method to try to separate into groups and to block things, putting in place somehow a blocking coalition,” Mr Macron said after the summit.
Leaders will now need to figure out how to revive the discussions — and how quickly to reconvene in Brussels. Mr Michel conceded that, like previous budget negotiations, there needed to be a summit that failed before leaders could come together to clinch a deal.
“We tried to reconcile different interests, but we need more time,” he said.