Cameron Stands Ground Over EU Budget in Talks With Merkel

U.K. Prime Minister David Cameron signaled he’s unwilling to compromise over the European Union budget, saying spending should be cut or frozen at a time of national austerity.

Cameron spoke before a working dinner with German Chancellor Angela Merkel at his Downing Street residence yesterday as differences threaten to derail a new seven-year EU spending deal and stoke tensions between Britain and its biggest trading partner.

There “should be at best a cut, at worst a freeze,” he told reporters last night. “Whatever the discussions we have today I will be trying to get a good deal for the British taxpayer, a good deal for Britain, one that I can put before the British Parliament, one that I can put before the British people.”

The European Commission has proposed a spending package of 1.03 trillion euros ($1.32 trillion) for the years 2014 through 2020, an increase of almost 6 percent from the 2007-2013 budget. Cameron has said the proposal is excessive and threatened to veto any deal he finds unacceptable.

Merkel declined to say whether she’d support a budget freeze. She said Britain and Germany must work together and acknowledged that not all EU expenditure “has been used with great efficiency.”

Cameron goes into the Nov. 22-23 Brussels summit under pressure at home after rebels in his Conservative Party defeated the government in an Oct. 31 parliamentary vote by joining forces with the Labour opposition to demand a real-terms cut in the EU budget.

Approval Needed

Any accord would require unanimous agreement, and Tory rebels have threatened to reject anything short of a spending cut, despite warnings from their Liberal Democrat coalition partners that such a deal is almost impossible to achieve.

While countries including Germany, Sweden and the Netherlands back Britain’s call for restraint, others in the 27- nation bloc want more spending to boost competitiveness and economic development in poorer states in eastern Europe.

Merkel has called for the budget to equal 1 percent of the EU economy, which would result in an above-inflation increase. Germany sees extended wrangling as a distraction from the main EU priorities of ending the euro-region debt crisis and spurring economic growth.

“Right now at a time when economies are weak it’s very, very important to have the predictability needed to know where to invest in coming years, know which areas we need to develop,” Merkel told the European Parliament yesterday. “That’s why the German government wants the summit in November to be a success.”

EU Ties

Failure to reach an agreement risks distancing Britain further from the rest of the EU. Opinion polls show Britons are mistrustful of the EU and many Tory euro-skeptics want a referendum on leaving altogether, leading to growing concerns about Britain’s future in the bloc.

That puts Cameron at odds with Merkel, who as the leader of Europe’s biggest economy is driving efforts to spur closer economic and fiscal integration to combat the region’s debt crisis.

“I can’t even imagine Great Britain not belonging to Europe,” Merkel told the EU Parliament. “And I think it’s good also for Great Britain to belong to Europe. I don’t think it would be good for Great Britain if you’re alone today in a world of 7 billion. And that’s why I’ll make every effort to have Great Britain as a good partner in the European Union.”

Cameron became the first prime minister to use the British veto when he blocked an EU-wide treaty change to enforce stricter fiscal discipline last year, delighting his party but angering European governments. He has also vowed to claw back powers from Brussels, fueling tensions with the Liberal Democrats who say it is step toward sliding out of the EU.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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