At the EU summit, leaders try to end weeks of infighting

This article is more than 9 years old

This article is more than 9 years old

David Cameron last night launched a divisive campaign to tie up a deal struck with France and Germany capping the European Union's medium-term spending plans, risking a conflict with eastern Europe and the European commission.

At a summit of EU leaders in Brussels that agreed to set up a permanent bailout fund to meet the eurozone debt crisis, Downing Street circulated a letter proposing to freeze the EU budget for the seven years from 2014, with increases allowing only for inflation.

British officials said the letter dealt merely with general aims and principles and included no figures.

European sources said the deal made with France left the common agricultural policy, the biggest part of the EU budget, untouched, and also would not affect Britain's budget rebate which goes back to 1984.

The proposal would mean cuts in that part of the EU's budget earmarked for the newer member states of eastern Europe.

"They want to cut the cohesion funds for the poorer member states," said a senior Polish official. "It's British perfidy, the British lie. No one in eastern Europe believes the British any more."

The letter drafted by the British stipulated a regime of "flat growth" for the EU budget from 2014. "European public spending cannot be exempt from the considerable efforts made by the member states to bring their public spending under control. Payment appropriations should increase, at most, by no more than inflation over the next [seven-year] financial perspective."

Cameron's attempt to seize the budget agenda spells a year of bruising battles with the European commission, the European parliament, eastern Europe, and the net beneficiaries of the EU budget.

It came as EU leaders sought to end weeks of infighting over how to respond to the eurozone's debt crisis. The summit agreed on a long-term bailout fund to stabilise the euro after a year of turmoil on the bond markets which brought Greece and Ireland to the brink of sovereign default, requiring EU rescue funds of almost €200bn.

European leaders agreed to change the Lisbon treaty to enable the 16 countries using the euro to establish a "European stability mechanism", a permanent bailout fund, from 2013. The detail governing the fund's use are to be hammered out in the next couple of months.

Germany sought the stiffest terms for amending the treaty, insisting the emergency fund be available only as "a last resort" for a state in distress; most other countries opposed that as too restrictive, so Germany backed down. "We can accept the text as it is," said a top German source.

The euro crisis has triggered competing proposals and bitter recrimination.

While agreeing to change the treaty, Cameron ran into strong opposition for insisting on a pledge that an article in the treaty, enabling emergency spending on natural disasters, cannot be used to ease a financial crisis.

In May, when the euro rescue fund was set up, its creators allowed the European commission to raise €60bn on the financial markets by using a legal loophole intended for raising funds to deal with natural disasters. Britain is liable for some of that money.