Europe Economy

EU Considered Freezing Britain Out of Budget Deal

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The European Commission confirmed on Friday that it had looked at ways of getting a deal on the European Union's next long-term budget without British consent so as to prevent Prime Minister David Cameron from vetoing the package.

Ahead of a summit in November, diplomats said EU officials had examined legal options to side-step a British veto, with Cameron considered the most likely to follow through with a threat to block a budget deal.

"There was some speculation, and even preparatory work done in the Commission, (on) whether it was feasible to have a budget ... without the UK,"

Janusz Lewandowski, the EU's most senior budget official, told a small group of reporters. Instead, EU leaders and officials sought to accommodate British demands for a freeze in the bloc's budget.

While the meeting ended without agreement, a compromise was put forward by European Council President Herman Van Rompuy to cut about 80 billion from the headline figure of nearly 1 trillion euros of proposed spending for 2014-2020.

Leaders will gather again in Brussels on Feb. 7-8 for a second attempt at striking a deal on the budget package.

Lewandowski said some net EU budget contributors - thought to include Britain, Germany and the Netherlands - had called in November for further cuts of about 30 billion euros to reach a deal, but others demurred, leading to the suspension.

"I think this is too much," he said of the 30 billion figure during a speech at the European Policy Centre, a think-tank.

"I do believe we are very close to the deal, but we cannot go too deep, because with every billion of cuts we will lose several votes in the European Parliament needed to have a final deal."

On Monday, the president of the European Parliament warned that the deeper the cuts are compared to the Commission's original proposal, the greater the chance of a no vote by parliament which would mean a renegotiation of the whole budget.

Likely Deal

Ahead of the next summit on Feb. 7, officials said talks are ongoing between Van Rompuy and EU capitals to define the overall shape of a deal before leaders arrive at that meeting.

Sources close to the talks said the final deal would likely see further cuts of about 20 billion euros beyond Van Rompuy's compromise, giving a limit of about 950 billion euros for EU spending commitments over seven years.

Lewandowski said Cameron's promise this week to hold a referendum on Britain's EU membership by the end of 2017 would not prevent a deal that is supported by Britain.

"This is a long-term financial commitment until 2020, but even with a referendum in 2017, I think we cannot expect an immediate (British) exit even in the worst scenario," he said.

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The Commission is working on ways to limit further cuts to the overall budget while still allowing Cameron to paint the result as a victory for Britain.

EU officials said one option was to keep a tight rein on future EU payment ceilings - forecasts for actual EU spending - as opposed to commitment ceilings, which define legal pledges to fund future projects that do not always materialise.

It is the difference between what countries might have to pay and what they actually pay, which is always less.

EU budget negotiations focus on commitment figures, while Britain is more concerned with payments, and officials are hoping to take advantage of flexibility in fixing payment levels on the basis of agreed commitments to keep the total down.

"It's going to be creative," Lewandowski said. "I cannot say now precisely how it is feasible, but I do believe that Mr Cameron could proclaim that the UK has had a dominant influence over the volume of the future European budget."