Britain hesitant on breakthrough EU budget deal

BRUSSELS (AP) ? A European Union summit pushing to end the region's economic turmoil and fight youth unemployment got distracted from its aim Thursday as Britain refused to sign off on a hard-fought deal for the bloc's future budget.

Two big agreements announced ahead of the meeting in Brussels ? on the multi-annual 960 billion euro ($1.3 trillion) budget and a deal on the shape of future bank bailouts ? had injected fresh credibility into leaders' efforts to control the region's economic problem.

But the deals didn't erase deep divisions among the leaders of the 27 EU nations over whether to spend or cut their way out of crisis, with the UK seeking reassurances that it won't have contribute too much at a time of belt-squeezing across the continent.

The 2014-2020 budget, which includes the first cuts to EU spending in its history, determines what the bloc can spend on common infrastructure like railway or road projects, farming subsidies and aid to poor countries. It's separate from national budgets, and much smaller, but the source of difficult and passionate debate.

Most key players hailed Thursday's budget deal that will finance EU projects through 2020. But British Prime Minister David Cameron sounded a different note, calling it "absolutely essential" that the EU stick to parts of an earlier agreement reached in February.

He insisted that Europe must do what "we're doing in Britain, which is getting control of spending, making sure we live within our means and then making ourselves more competitive."

EU leaders sought to allay the British concerns at their talks Thursday night, according to diplomats. Those talks were meant to focus on finding ways to get more young people employed, and calmly taking stock of EU efforts to stabilize the world's biggest economic bloc now that its deep debt troubles have subsided.

The EU countries have been trying since last fall to cobble the budget together. Some countries wanted to increase or maintain spending levels while others firmly insisted it made no sense to increase the budget while individual governments were imposing tough austerity policies at home.

The European Parliament, which must approve the budget, rejected the compromise reached by EU leaders in February. It asked for more flexibility, a greater say in the way the budget allocates spending and the ability to renegotiate the overall spending level once the economy picked up and the EU took over more responsibilities from member states. Finally, lawmakers asked for money to be spent to boost employment.

Crucially, the EU budget also includes money for the employment measures that EU leaders are debating at this week's summit. No budget agreement would mean no money for those projects.

After months of arguments, European Parliament President Martin Schulz triumphantly announced a budget agreement with the European Commission on Thursday morning.

Thursday evening, he said he was "quite surprised" that the EU leaders didn't sign on. "I had thought ... that things were almost wrapped up. That is not the case," he told reporters.

"If it fails here (among EU leaders) ... that is certainly not the best way of regaining confidence in Europe."

The EU's 27 leaders are at odds over how to step up the fight against unemployment, with a German-led group calling for structural reforms and others saying more spending was needed to kick-start growth.

Unemployment is at a record high of 11 percent for the EU and 12.2 percent for the 17 member countries that use the euro.

It is far worse for the young who have been disproportionately punished by years of crisis and recession. Latest figures show almost one in four people aged under 25 in the EU are unemployed. In Greece and Spain, that rate has it hit more than 50 percent.

"It is simply unacceptable that young people should be paying with their life chances for a crisis for which they are entirely blameless," Schulz told the leaders.

But Germany, Europe's reluctant paymaster, again dashed hopes of investing any new money to ease the problem.

"The German government insists that the problems of Europe and the eurozone have to be tackled at the root and solved step by step," Chancellor Angela Merkel said ahead of the summit. Spending more won't solve the problems, she insisted.

The leaders' flagship unemployment policy is a pledge made last year to spend 6 billion euros getting young people back to work, starting in 2014. Half of that money, however, is only being repackaged from other existing budget projects.

Thursday's deal on the budget came only hours after EU finance ministers reached a landmark deal determining that banks' shareholders, creditors and holders of large deposits will have to bear the brunt of future bank failures, so that taxpayers don't have to. The joint rules on how to restructure or wind down banks are a key step toward establishing a so-called banking union for Europe, aimed at restoring stability after a tumultuous few years that have dragged down the global economy.

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Angela Charlton and Sylvain Plazy in Brussels and Geir Moulson in Berlin contributed to this report.

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Follow Juergen Baetz on Twitter at http://www.twitter.com/jbaetz

Source: http://news.yahoo.com/britain-hesitant-breakthrough-eu-budget-deal-203606046.html

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