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EU's grand ambitions threatened by budget dispute

The M31 highway under construction between Godollo and Budapest in 2009. Farm subsidies and infrastructure projects will be under discussion at European Union budget negotiations this week.

The European Union's massive spending on farm subsidies and infrastructure projects will be in the spotlight at difficult talks this week to set the bloc's next longterm budget.

Sources at both the European Commission and the European Parliament say EU leaders will be looking to trim a further 20 to 25 billion euros ($30-$35 billion) off the almost trillion-euro ($1.36 trillion) budget for 2014-2020 at a February 7-8 summit.

"All the projects for the future that could bring growth and jobs are under threat," a source familiar with the budget negotiations told AFP. "The crisis is killing all our ambitions."

The summit will be the second attempt by the 27 leaders to reach a deal on the budget after a November summit collapsed in acrimony.

The Commission had originally sought 1.047 trillion euros for the 2014-2020 EU budget.

EU President Herman Van Rompuy tried to broker an agreement at the November summit with a proposal for 74 billion in cuts to bring the budget down to 973 billion, or 1.01 percent of Europe's GDP.

However Britain, Sweden and the Netherlands pushed for still deeper cuts, with British Prime Minister David Cameron seeking to bring the budget down to 886 billion euros.

Many of the likely new cuts will be in the so-called "Connecting Europe" facility, a grand bid to connect up nations in the fields of energy, transport and digital networks.

The ambitious scheme dreamt up by the EU executive, the Commission, to propel the bloc into the future, is seen by several nations as too big a drain on the budget.

Salaries and other institutional costs that previously were left untouched would also see cuts.

The EU's administration commissioner Maros Sefcovic "is very worried about how discussions are going" and has warned against the risk of "breaking the European machinery," said a source.

Funds saved from these areas would be allocated to the Common Agricultural Policy (CAP) favoured by the big farming nations such as France and Spain, or to so-called "cohesion" funds to help poorer regions catch up with others, which are popular among the newer eastern European members of the bloc.

"This summit risks being the summit of the missed opportunity," said another official close to the budget talks, speaking on condition of anonymity.

With only a few days left, backroom talks are continuing.

The EU big two, France and Germany, are still not on the same page while Italy's Mario Monti, who is on the election campaign trail, is opposed to major cuts.

Monti said this week he was looking forward to seeing new proposals from Van Rompuy and that it was important for Italy that the budget be used to promote the EU's "ambitious goals" of growth and solidarity.

He spoke as he met with German Chancellor Angela Merkel amid a frantic round of shuttle diplomacy among the EU's top leaders ahead of the summit.

Merkel is meeting Spanish Prime Minister Mariano Rajoy on Monday and French President Francois Hollande on Wednesday. Monti announced he was meeting Hollande on Saturday for talks on the budget.

Hollande is to meet Poland's Donald Tusk next week.

"These are all very multi-layered and complex topics," Monti acknowledged.

Leaders need to be unanimous on any compromise, which will then need to be agreed by the European Parliament, whose members have been offered a secret vote to avoid all pressure.

But the head of the parliament, German Socialist Martin Schulz, has warned of a likely "no" vote if the leaders agree a budget that is far below the initial ambitious proposals submitted by the Commission.

"If there is no deal, we can live with an annual budget," said Schulz.

Under this fallback system, which critics say undermines longterm projects and planning, the annual EU budget is automatically renewed at the previous year's level plus inflation.