A summit of the European Union's 27 national leaders, charged with agreeing on a long-term budget for the bloc, broke up Friday afternoon without being able to reach a deal.
Coming just days after the 17 eurogroup finance ministers failed, yet again, to agree on the conditions for releasing badly needed bailout money for Greece, the failure of the two-day summit raises questions about how the bloc makes important decisions. In most cases, unanimity is required, meaning that each country wields veto power.
The EU's top officials, who put in long hours trying to soften up the national leaders individually before putting them together in the same meeting room, tried to put a brave face on the budget deadlock.
European Council President Herman Van Rompuy, who presides over the summits, said the “constructive discussions'' at the summit meant an agreement could be reached early next year. He added that the national leaders had instructed him and European Commission President Jose Manuel Barroso to continue working toward consensus over the coming weeks.
Barroso, too, called the talks constructive. But he added, “we are not yet at the point of reaching consensus.''
The prospect of failure had hung over the EU leaders' summit, charged with agreeing on a long-term spending plan of around (euro) 1 trillion ($1.25 trillion) for the 27- country bloc, even before the meeting began.
Some countries wanted the budget to rise, while others insisted it had to fall.
Van Rompuy tried to thread the needle. He proposed a budget with some cuts, but in a post-summit press conference, he also offered a nod to those countries who believe greater spending is essential to spur growth in countries hit by recession.
“Growth in one country benefits all,'' he said.
British Prime Minister David Cameron, the most vocal proponent of holding the line on EU spending, said he had found "strong allies'' in the Dutch and Swedish leaders. And, indeed, it appeared that some countries, including Germany, took pains to ensure that Britain – a country some fear may eventually withdraw from the EU – did not find itself isolated.
Dutch Prime Minister Mark Rutte stressed that it was important that Britain “remain engaged'' with Europe “because Britain is important to the EU as a whole.''
For his part, Cameron was firm. “The deal on the table from the EU President was just not good enough,'' Cameron told reporters after the summit broke up.
"We haven't got the deal we wanted but we've stopped what would have been an unacceptable deal,'' he said. “And in European terms I think that goes down as progress.''
The EU budget funds primarily programs to help farming and spur growth in the bloc's less developed countries. In financial terms, the budget amounts to only about 1 percent of the EU's gross domestic product, but carries great political significance as it lays bare the balance of power between the bloc's members.
The bloc found itself divided, notably between richer countries that wanted to contain their contributions to the common budget at a time of economic malaise, and poorer ones that rely on EU money for development aid and economic investment.
While Cameron and some other leaders demanded restraint, French President Francois Hollande wanted the budget to keep paying subsidies for farming and development programs.
A number of poorer nations, which are net recipients of EU budget money, argued that a robust budget was good for all countries.
A revised proposal given to the leaders late Thursday by Van Rompuy did little to appease either side. It kept the same total of (euro) 972 billion ($1.25 trillion) in states' commitments as his first proposal – (euro) 21 billion less than the 2007-2013 budget – but it shifted some money away from investment projects toward aid for farming and development.
Hollande said Van Rompuy's proposal was reasonable. “We want a consistent budget that funds EU policies,'' Hollande said.
Further cuts, the French president said, would not be welcome.
German Chancellor Angela Merkel said the strong differences of opinion were no cause for alarm – and she wasn't taking sides in the argument between those who want more spending and those who want less.
“We should be able to bridge those differences,'' she said. “We have a reached a good basis to continue our work.''
“Our bilateral talks showed there is sufficient ground to reach agreement,'' she said.
There is no set deadline for a deal, but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs. If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 percent increase accounting for inflation.