EU under fire for spendthrift trillion-euro budget

Europe's austerity-driven governments rounded on Thursday on the European Commission's proposals for a record, more than trillion-euro, EU budget as "unrealistic" and "irresponsible". Almost immediately after being unveiled late on Wednesday, the draft budget for the next 2014-2020 period came under strong fire from two of the bloc's "big three" powers -- Britain and Germany -- for a five-percent rise geared to send spending soaring to 1,083 billion euros ($1,570 billion). German Foreign Minister Guido Westerwelle, deeming it "irresponsibly high", reminded the European Union's executive arm that "in times of general budgetary consolidation Brussels must also send a message to frugally and sustainably economise." London issued the same message, demanding Brussels "take the same tough measures as national governments are taking across Europe" and recalling that the union's top players had demanded zero budgetary growth for the future. "We will stick to that," said a British government spokesman. The European parliament, which was clamouring for a five percent increase to cover new needs and fresh policies, applauded the proposals. Westerwelle said Germany saw one percent of EU economic output forecast as one trillion euros ($1.4 billion) for the period as sufficient to cover EU spending during that time. With a slight sleight of hand, commission officials put the budget at a total 1,025 billion euros, or 1.05 percent of the 27-nation bloc's gross national income, while omitting 58.3 billion of emergency funds set aside for emergencies such as aid or farm crises. Overall, the budget redefines EU priorities, reducing funds for farmers to invest instead in infrastructure and the greening of Europe with a strong focus on building cross-border energy, telecoms and transport grids aimed at streamlining economic integration in the world's biggest market. It also proposes the introduction of an EU sales tax and financial services tax to allow the bloc to raise its own funds rather than depend so heavily on funding from the EU member states. While the commission has until late 2012 to hammer through a deal on its bombshell budget, the fiery immediate responses presage months of heated debate. The Netherlands slapped down the idea of taxes, saying "taxation is a national competence", while Britain warned against the introduction of a financial services tax in Europe that could send firms running for cover elsewhere. "We think this should be done on a global level," said a British diplomat. Monies raised directly through an EU VAT representing one or two percentage points of national sales tax and a financial transactions tax worth some 30 billion euros a year, would bring in more than 40 percent of EU revenue, said budget commissioner Janusz Lewandowski. Stepping onto contentious ground, the commission also suggested a sweeping reform of EU 'rebates', a system of yearly paybacks to certain member states who claim excessive contributions into the EU coffer and which notably includes a huge rebate to London negotiated decades back by Margaret Thatcher. EU officials said complex routine haggling over the rebates to Britain, Germany, the Netherlands and Sweden could be replaced by a fixed lump sum in the interest of "something very simple". Admitting the lump payments would be "a little under current amounts", officials suggested 3.5 billion euros yearly to Britain, 2.5 billion to Germany, 1.05 billion to the Netherlands and 350 million to Sweden. Sweden said that would "substantially increase" its contribution to the EU budget while in Copenhagen, Denmark demanded its own rebate, saying: "it is not reasonable that Denmark should have to finance the rebates of other wealthy countries without getting one itself." London "will continue to protect the rebate", a government spokesman said. "Without it, the UK's net contribution as a percentage of national income would be the largest across the EU, twice as large as France's and Italy's, and almost one and a half times bigger than Germany's." Italy said it had set itself a priority of obtaining a reducation of its contribution and would not accept that some countries should have a privileged position. But also said that in general it accepted that the EU should have a budget to match its ambitions.