EU leaders were deadlocked over the bloc’s next multiannual budget on Friday after lengthy summit talks overnight laid bare rifts over how to fill the €60bn-€75bn funding gap created by Brexit. The bleak mood was summed up by Danish prime minister Mette Frederiksen, who said she thought a deal would not be reached this week. “I’m willing to stay and I’m prepared to stay the whole weekend. But, no, I don’t think we are going to reach an agreement,” she told reporters as she arrived back at the meeting. She said another summit would “probably” be needed.
Charles Michel, the European Council president, spent much of the night locked in one-to-one talks with leaders as he attempted to end an impasse over the 2021-27 spending plans. At 5am on Friday, he still had five of the bloc’s 27 members to see. Mr Michel was struggling to contain a rebellion by Germany and a “frugal four” group of smaller, rich member states. They have protested against plans to slash rebates they receive on their EU budget contributions and called for the budget to be capped at 1 per cent of the bloc’s gross national income.
Britain’s departure has left the EU struggling to finance ambitious policies to fight climate change, aid poorer regions and subsidise farmers without placing heavier burdens on richer northern European countries that have baulked at proposals tabled by Mr Michel so far. All leaders are being asked to give ground in the negotiations: net payers into the budget are being asked to assume a bigger burden, while net recipients face tighter spending programmes. The European Commission has warned that further delay in reaching a deal risks hampering the rollout of core EU programmes.
Emmanuel Macron, the French president, emphasised that the bloc must not allow itself to be derailed by Brexit. “We have to take account of the British departure,” he told reporters on Thursday. “But it would be unacceptable to have a Europe that compensates for Britain leaving by scaling back its means.” Summit talks will continue in Brussels on Friday as Mr Michel seeks a breakthrough. A number of governments are demanding that he come forward with an entirely new proposal.
A barrier to progress in the night’s discussions were proposals from Brussels to phase out the rebates granted to Germany, the Netherlands, Denmark, Sweden and Austria — all of which are among the largest net payers into the budget. Chancellor Angela Merkel told her fellow leaders that Germany would insist on its rebate for the full seven-year period of the upcoming multiannual financial framework, or MFF, and that the sum should not decline in value.
That message was echoed by leaders of other net contributors, including the Dutch prime minister Mark Rutte, in a roundtable discussion. On the eve of the summit Mr Michel proposed lower rebates for the key recipients but they rebuffed his overture. Other leaders led by Mr Macron insisted the payments needed to be ditched entirely. The five countries’ rebates were in current prices worth €6.4bn in 2020, according to European Commission figures, with Germany the biggest recipient at €3.76bn.
Hans Dahlgren, Sweden’s EU affairs minister, told the Financial Times his country had joined with three other governments benefiting from rebates to discuss the budget with Mr Michel. “The only thing I can say is that there is no new proposal on the table,” he said. Ms Merkel told reporters that leaders from the 27 member states faced a complex task and that they would have to overcome big differences. “Germany is not satisfied with the current status of negotiations, because we think we don’t yet have an adequate balance among the net contributors to the budget,” she said.
Going into the summit Mr Michel was proposing a €1.09tn budget for the period from 2021 to 2027. That would be worth 1.074 per cent of the region’s gross national income, but this is higher than the 1 per cent that frugal states have insisted they are willing to pay. Among Mr Michel’s pre-summit proposals was a plan to boost the capital of the European Investment Bank, the EU’s Luxembourg-based multilateral lender, in order to mobilise an extra €500bn of investment firepower. This idea was shot down by Ms Merkel during discussions with fellow leaders, as she reiterated her country’s longstanding concerns that the institution is not adequately supervised.
Mr Michel also suggested adding €6bn to cohesion spending, the part of the budget that goes to boosting regional economies, compared with proposals from the Finnish EU presidency late last year. Cohesion would also be adjusted to divert some funding from better-off areas and make it easier to shift money between different spending pots. His overtures received a mixed response from eastern European countries while frustrating some richer countries, which accused him of offering too many concessions.
Mateusz Morawiecki, Poland’s prime minister, described the discussions as “the most difficult negotiations in history” for the EU budget.
Xavier Bettel, Luxembourg’s prime minister, said member states were giving themselves an impossible task in the discussions given the EU’s swelling list of priorities and reduced budgetary firepower. “The proposal is we want to do more with less. I don’t know if Charles Michel is the twin brother of David Copperfield,” he said, in a reference to the magician.