Germany, Britain Clash Over EU Budget

Germany hopes the EU can reach a budget accord for 2007 to 2103 while Luxemburg holds the EU presidency, German Chancellor Gerhard Schröder said Tuesday evening. But resistance from Britain may make that impossible.

Just one week before a decisive EU summit on June 16 and 17, players the front lines in the debate over the European Union's mid-term financial planning have entrenched themselves in their positions.

UK brandishes veto threat

Despite a looming constitutional crisis, Great Britain is holding tight to its veto threat, which it says it will use to secure the continued reduced fees it currently pays into EU coffers.

"Our position hasn't changed," British Finance Minister Gordon Brown (photo) said at a meeting with his EU colleagues on Tuesday in Luxemburg.

Schröder, for his part, warned while he is willing to make concessions to toward compromise with his EU partners, they won't be too extreme.

'Feasible' concessions for Germany

"Germany can and will make concessions," Schröder said in a press statement during the Luxemburg meeting. But any compromise has to stay within limits that "have to be financially feasible for Germany. We aren't at that point yet."

The decisive question revolves around how much each country has to pay into the communal EU pot.

"We are still far apart on this issue," Schröder said, clearly referring to British discount.

"We will use our veto if we have to in order to support the British position," Brown replied. Yet if Britain fails to give in on this point, the summit planned for next week is liable to run aground.

Since 1984, Britain has been allowed to pay a reduced amount toward the EU budget, totalling some 4.6 billion euros ($5.6 billion) per year. The initial reason for this was that there were significantly fewer farmers to receive EU subsidies in Britain than in other EU nations. But since these subsidies have been falling for years, the discount is widely considered to be inappropriate.

The other 24 EU states have demanded that the regulation be done away with.

And the vice-president of the European Commission, Günter Verheugen (photo), on Wednesday described the British rebate as "unreasonable." He said the UK must help to fund the bloc's enlargement.

"There is absolutely nothing to justify that Britain does not pay its part of the costs of enlargement," Verheugen told Germany's ZDF television.

Britain 'unreasonable'?

"I find it really unreasonable that one of the richest countries in Europe, and that is what Britain is today, is being partly financed by Europe's poorest countries, in other words the new members," he added.

The current EU Council Chairman Jean-Claude Juncker (photo) wants to meet with Blair on Tuesday, to discuss possible solutions to the deadlock; he plans to make a new compromise offer on Wednesday.

Juncker once again warned the nations to seek a compromise. The summit must see to it that "Europe doesn't sink into a mire" he said, noting the recent French and Dutch rejections of the EU constitution.

Aside from the British payment, further discussion continues on the overall disbursements of the EU from 2007 to 2013. The EU commission wants a budget of 1.025 trillion euros. But the union's main financial contributors Germany, Sweden, the Netherlands, Great Britain, France and Austria, insist on a sum of 815 billion euros. Luxemburg's suggestion was a compromise of around 870 billion euros.

Schröder seeks offensive tact

Schröder refused to speculate on whether an agreement could be reached.

"I and many of my colleagues agree that, especially now, we can't allow the European process to just trickle away," he said.

Rather, he said, EU supporters should take an offensive tact. And he affirmed Germany's wish to see further expansion in the European Union.