EU budget talks collapse

The first round in two weeks of tough talks on the European Union budget collapsed Friday after austerity-minded states refused to plug a 2012 budget shortfall in funds destined for Europe's needy.

Friday's talks had been scheduled to approve a budget for 2013 but instead snagged straight off on an 8.9-billion-euro ($11.3-billion) hole in this year's spending, according to figures provided by the European Commission.

Approval for the massive EU budget must be agreed between the 27 member states and the European Parliament, but MEP Alain Lamassoure, who heads the assembly's budget committee, said: "The council (of ministers) were unable to negotiate so the negotiations were suspended.

The collapse of the 2013 budget talks, which will resume Tuesday, augurs badly for a November 22-23 summit called to settle the bloc's even more hotly disputed 2014-2020 spending plans.

"If we succeed in these negotiations now, we'll create a better atmosphere for convergence and agreement in the (summit) negotiations," Cyprus's deputy EU minister Andreas Mavroyannis, who chaired Friday's session, had said.

But even before considering spending for 2013, governments refused to contribute funds to make up this year's shortfall, threatening the future of a wide range of social programmes including the Erasmus student exchange scheme.

It also included huge sums of some 1.5 billion euros each owed to Italy, Poland and Spain, of which 670 million euros had been set aside to compensate Italian earthquake victims. Officials said EU governments had pledged to ensure Italy would receive the funds.

At the talks, eight nations -- Austria, Britain, Denmark, Germany, France, Finland, the Netherlands and Sweden -- demanded that the EU's executive use 15 billion euros of non-spent monies to plug the hole.

But the Commission said those monies had already been spent.

Mavroyannis said conciliation efforts would continue until a Tuesday deadline.

"If we realise we don't have a stand we will follow the provisions of the treaty, which provide that the Commission will have to come up with a new proposal," he told a news conference.

Poland's prime minister meanwhile urged net beneficiary EU members not to block talks on the 2014-2020 budget at the upcoming summit.

"A veto of the budget is not in Poland's interest. It creates the opportunity to find solutions for the future -- it shouldn't be used except as a last resort," said Prime Minister Donald Tusk.

"There are some countries that would be very pleased to see one of the net beneficiary countries impose their veto. Poland won't do it," he added.

For 2013, the European Commission and European Parliament are seeking a 6.8-percent increase -- or nine billion euros -- to 138 billion euros to bolster growth and jobs in the slowing economy.

But net contributors, led by Britain, are seeking a sharp reduction to match the spending cuts and austerity policies of most European capitals.

France, Finland and Germany want the 2013 budget to be cut by 5.0 billion euros, while London has suggested even more, stressing the need for austerity.

The Commission, the EU's executive arm, argues this will seriously undercut any chance for economic growth, worsening the very problems such countries say must be fixed through more belt-tightening.

With the Erasmus student exchange programme also at stake, some 100 famous Europeans, from footballers to philosophers, this week urged the EU to reach a deal.

"The economic crisis has hit Europe's youth very hard," said a letter from figures including former international footballer Lilian Thuram, Spanish filmmaker Pedro Almodovar and British playwright David Hare.

"One in five young Europeans -- more than five million -- are without a job. This cannot continue. We cannot afford a lost generation," it said.

Last month, British Prime Minister David Cameron threatened to veto the 2014-2020 budget at the November 22-23 summit if Brussels insisted on an increase of 5.0 percent to around 1.0 trillion euros.

If there is no agreement on the 2013 budget, the EU would base its spending for next year on the 2012 programme, rolled over on a monthly basis.

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