EU opens tough talks on 2011 budget rise

Cuts in national budgets make many leaders keen to rein in EU spending

European governments have gone into battle against Euro MPs and the EU Commission over the size of next year's EU budget.

France and Germany are among 12 EU governments backing UK Prime Minister David Cameron in setting 2.9% as the maximum acceptable budget increase.

The European Parliament voted for a 6% increase - a figure backed by the European Commission.

If there is no deal before December the budget will stay at the 2010 level.

A three-week "conciliation" period began on 27 October for the parliament and the Council - the body representing the 27 EU governments - to thrash out a deal.

The draft 2011 budget set by the Commission totals 130bn euros (£112bn; $179bn).

MEPs and the Commission argue that a 6% increase is necessary to fund institutional changes brought in by the EU's Lisbon Treaty, including the new EU diplomatic service, due to be launched next month.

The treaty gave MEPs real power to influence the budget, for the first time in the EU's history.

Extra spending

MEPs also voted for increases in several other areas, including an extra 38m euros for programmes to boost innovation and skills, an extra 300m euros for a dairy fund, as part of the EU's farm support, and an extra 100m euros in aid for the Palestinians.

Part of the increase would be offset by cuts in other areas, including 47m euros taken from the Iter fusion energy project.

MEPs and the Commission are also engaged in a court battle with EU governments over a proposed 3.7% pay rise for nearly 45,000 EU staff, including commissioners. The governments want to limit the rise to 1.85%.

At a summit in late October the governments agreed that the EU budget should reflect current economic conditions in member states, most of which are cutting jobs and investment in the public sector.

"It is essential that the EU budget and the forthcoming multi-annual financial framework reflect the consolidation efforts being made by member states to bring deficit and debt onto a more sustainable path," they said in the summit conclusions.

Mr Cameron said reaching agreement on the 2.9% figure at the summit was a success, but his opponents pointed out that he had previously called for a budget freeze. The extra cost to the UK of a 2.9% rise has been estimated at £450m a year.

Even if agreement is reached on 2.9%, the governments will have to put in additional money next year to meet existing commitments, Polish centre-right MEP Sidonia Jedrzejewska said.

Ms Jedrzejewska, the parliament's chief budget negotiator, said pledges had been made in 2006 in areas such as research and "cohesion" funding for the EU's poorest regions - pledges that would have to be fulfilled.

Accounting errors

On Tuesday the EU's budget auditors said the EU accounts for 2009 were "free from material misstatements and hence reliable".

But they said only two areas of spending were free from error - administrative expenditure and economic and financial affairs.

Court of Auditors President Vitor Caldeira said that in one area the estimated error rate was above 5% - Cohesion allocations to the EU's poorest regions.

Cohesion, amounting to nearly a third of the EU budget, is the biggest item of spending after grants for farmers and rural development.

Mr Caldeira said the auditors had found "serious failures of national authorities to apply the rules on public procurement".

The persistent errors mean that every year since 1995 the EU auditors have refused to sign off on the budget.

"Payments from the budget continue to be materially affected by error, except in two areas of expenditure," Mr Caldeira said.

On Wednesday the think-tank Open Europe produced a list of what it called "EU waste", including 411,000 euros spent on a dog fitness centre in Hungary that was never built, 5.25m euros spent on limousines for MEPs in Strasbourg and 900,000 euros spent on a golf course, hotel and spa facilities in Strelasund, Germany. Open Europe campaigns for radical reform of the EU.