Stalemate in Brussels as EU fails to agree budget

Cameron claims victory over defence of UK’s €3.6bn rebate but is accused of blackmail

The European Union was in disarray tonight after its 27 leaders failed to reach agreement on a new €970bn budget at a two-day summit which collapsed amid acrimony.

David Cameron was accused of trying to “blackmail” other EU leaders but he was not the only stumbling block to a deal for 2014-20 and did not need to wield his veto. Crucially, there was no agreement between France, anxious to preserve farm subsidies, and Germany, which backed Britain’s call for deeper EU spending cuts along with the Netherlands and Sweden.

At a Brussels press conference, Mr Cameron fired another broadside at EU bodies after he failed to win cuts in the administration budget. “EU institutions simply have to adjust to the real world. Brussels continues to exist as if it is in a parallel universe,” he said. He complained that “not a single euro” of savings from the generous pay and perks of Brussels officials had been proposed, which was “insulting to European taxpayers.”

The Prime Minister, who argued for cuts of about €50bn over the seven-year budget period, said Britain and its allies had “stopped what would have been an unacceptable deal”.

He also preserved Britain’s €3.6bn-a-year rebate on its EU contributions, which came under attack from several countries. Mr Cameron claimed that he had seen off an attempt to isolate the UK by uniting all the other 26 EU members against it. Angela Merkel, the German Chancellor, halted that idea in its tracks.

European leaders will resume talks on the budget early next year. To retain Germany’s support, Mr Cameron will be under pressure to approve plans for banking union in the eurozone at another EU summit next month.

The Prime Minister again raised the prospect of a referendum on Britain’s relationship with the EU. He said the “new settlement” that would follow the euro crisis would bring opportunities for “new consent,” adding: “I support our membership of the EU but I don’t support the status quo.”

British officials blamed the summit’s collapse on the negotiating strategy of Herman van Rompuy, who chaired the talks as President of the European Council. One claimed he had botched it, making little progress in his one-to-one talks with individual leaders and restricting the scope for discussion between the 27 leaders.

Brussels sources hit back, saying there was an unbridgeable gap among countries who are net contributors to the EU budget –notably France and Germany. Mr Van Rompuy tried to reach a compromise by switching money from investment projects to farm subsidies and grants to poor regions but failed to build momentum towards a deal.

Dismissing Mr Cameron’s latest attack on the Brussels bureaucracy,  sources insisted Mr Van Rompuy and Jose Manuel Barroso, President of the European Commission, did not have a veto on the budget. They said administration accounted for only 6 per cent of EU spending, that €6bn had been cut since 2004 and staffing was being reduced by 5 per cent.

François Hollande, the President of France, said: “At past budget summits we tended to see an alliance between France, Germany and Britain to reduce the size of it. The fact there was a change in May [with his election as President] meant our positions were not as unanimous. Today the most uncompromising [countries] are talking about [cuts of] €30bn. These are not insurmountable amounts.”

Hannes Swoboda, president of the Progressive Alliance of Socialists and Democrats which includes Labour MEPs, said: “It is unacceptable that the majority of member countries are letting themselves be blackmailed by David Cameron who is permanently threatening to block progress in the EU. The British Prime Minister, who is considering leading the UK out of the EU, is having more impact on the future of the EU than those who are committed to strengthening the EU and fulfilling their obligations.”

Guy Verhofstadt, a former Belgian Prime Minister and leader of the  European Parliament group that includes the British Liberal Democrats, said the UK rebate should be abolished. He said: “It is not necessary to isolate Cameron. He isolates himself.”

Ed Balls, the shadow Chancellor, said: “David Cameron has failed to persuade other European leaders to deliver the reform of and real-terms cut in the budget which MPs voted for. He is increasingly weak and isolated in Europe, just as he is at home.”