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EU leaders brace for tough budget summit

By Laura Smith-Spark, CNN
November 22, 2012 -- Updated 1451 GMT (2251 HKT)
British Prime Minister David Cameron arrives to Brussels for a two-day EU leaders summit on November 22.
British Prime Minister David Cameron arrives to Brussels for a two-day EU leaders summit on November 22.
  • EU leaders are discussing the bloc's next seven-year budget plan in Brussels
  • The European Commission wants to raise its budget for 2014-2020 to $1.2 trillion
  • Some EU nations, including Britain, are opposed to a budget increase
  • Cameron: "We are going to be negotiating very hard for a good deal for British taxpayers"

(CNN) -- European Union leaders are gathering at a summit in Belgium Thursday to try to reach an agreement on a new seven-year EU budget, with tensions high due to the continuing economic crisis.

The European Commission wants to raise its budget for 2014-2020 to $1.2 trillion -- but the proposal has already met fierce opposition from some austerity-stricken member states.

They argue that they're having to make heavy cuts to their own national budgets, so they want to see the EU budget frozen or cut as well. The majority of EU funding comes from contributions from member states.

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British Prime Minister David Cameron has been a vocal critic of the proposed budget and has threatened to exercise Britain's veto if necessary to protect its interests.

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"I'm not happy at all. These are very important negotiations. Clearly at a time when we are making difficult decisions at home over public spending, it would be quite wrong -- it is quite wrong -- for there to be proposals for this increased extra spending in the EU," he told reporters Thursday morning as he arrived in Brussels.

"So we are going to be negotiating very hard for a good deal for British taxpayers and for European taxpayers, and to keep the British rebate."

The rebate is a multi-billion dollar sum that Britain gets back from the European Union because it benefits less than other member states from agricultural subsidies. It was first secured by former Prime Minister Margaret Thatcher in the mid-1980s but is viewed as unfair by some nations.

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If Cameron or others do veto any real-terms spending increase, the budget plan may have to be rolled over.

A number of bilateral meetings are taking place in Brussels ahead of the negotiations between all 27 EU member states, with the summit due to last at least 48 hours.

The proposed $1.2 trillion budget includes nearly $397 billion for cohesion funding, or spending that seeks to narrow the economic gap between different EU states, and just over $346 billion for the Common Agricultural Policy, or aid for farmers.

The CAP has historically been a bone of contention among EU member states, with those that don't have a large agrarian sector getting less out of it than those that do. France opposes cuts to agricultural subsidies and is arguing instead for a cut in the UK rebate.

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Many countries in central or eastern Europe also oppose cuts to cohesion funding, which helps pay for big infrastructure projects.

The budget also earmarks $195.6 billion for competitiveness and growth, a major concern as many EU states face record levels of unemployment. Efforts to try to boost growth and job creation are a high priority, but cost a lot of money.

Administration costs for the region are about $80 billion, which includes pensions for EU staff and the cost of schooling for their children. Many EU employees have to relocate for their jobs.

International development aid outside the EU is also a big part of the budget, accounting for some $84 billion. This includes help for some countries who are seeking to join the EU, such as Turkey.

The EU's yearly spending amounts to about 1% of the region's annual economic output.

CNN's Nina Dos Santos contributed to this report.

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