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Europe

The EU Budget Stand-Off: The Areas of Conflict

As the six-month British presidency draws to a close, EU leaders embark on a critical week aimed at breaking the deadlock over the bloc's budget. DW-WORLD looks at the major areas of conflict.

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EU leaders know the clock is ticking as they meet to thrash out a final budget agreement

With the clock ticking down to the final days before the next budget needs to be signed and sealed, the European Union is locked in a major dispute over who pays how much into the EU pot -- and, just as important, who receives what over the seven years from 2007-2013.

Key sticking points are Britain's refusal to give ground on its budget rebate, and French resistance to surrendering support for EU farmers, which swallows about 40 percent of spending.

But the stakes are also high for the EU's newer member states, desperate to get hold of EU aid for infrastructure such as motorway and train links, left lagging behind Western Europe by decades of communism.

More broadly, failure to agree on a budget would leave the EU scuffling over its budget on a year-by-year basis, threatening regular deadlock in a bloc already hobbled by the rejection of its constitution this year.

Britain, which holds the EU's presidency, is set to make modified proposals after talks among foreign ministers Monday, as preparation for a summit of the bloc's leaders starting on Thursday. London is still hopeful a deal can be struck.

Here are some basic facts about the EU budget:

Global spending

The six main contributors to the budget -- Austria, Britain, France, Germany, the Netherlands and Sweden -- want spending limited to about 1.0 percent of EU gross national income, or 815 billion euros (954 billion dollars).

But the European Commission wants a robust budget to pay for ambitious programs sought by member states and has called for payments of 943 billion euros (1.14 percent of GNI) over the 2007-2013 period, while the parliament suggests 883 billion euros would be enough.

Luxembourg, which tried to negotiate a budget deal in June when it held the EU's presidency, offered a compromise of 875 billion euros but it was rejected by Britain, Finland, the Netherlands, Spain and Sweden.

London argued last week that the budget should be smaller and proposed an estimated 846.8 billion euros, an offer which has largely been rejected.

Net contributors

The member states often concentrate on how much they pay into the budget and how little they get back -- their net outlay. In 2001, an average German citizen "paid" 114 euros a year to the budget while the average Spaniard "received" 180 euros.

The three biggest net contributors, Germany, the Netherlands and Sweden would like to see their burden reduced.

Farm Aid: The Common Agricultural Policy (CAP)

Under a Franco-German initiative, farm spending was set in 2002 at a summit aimed at preparing for EU enlargement. CAP spending will stabilize from 2006 at around 45.5 billion euros annually, plus around one percent each year.

France, the system's major beneficiary as the Union's biggest agricultural producer, has so far refused to renegotiate the agreement, which is hotly contested by Britain.

Britain's rebate

The British rebate, a jealously-guarded mechanism for reducing its financial burden because it profits little from subsidies, averaged 4.6 billion euros (5.4 billion dollars, 3.1 billion pounds) annually between 1997 and 2003.

By last year, the rebate, which grows in proportion to EU spending, had reached 5.3 billion euros and is projected to average 7.1 billion euros annually for the 2007-2013 budget period.

Regional aid

The 10 members who joined in May 2004 are waiting impatiently for EU regional funding, but until now it has been Greece, Ireland, Italy, Portugal and Spain which have benefited most.

Despite fierce opposition, Britain has proposed a cut in such aid to new member states on the grounds that newcomers are rarely able to absorb all of the EU money put in front of them.

Research and transport: EU's future?

To help improve the EU's competitiveness, the commission has proposed trebling the budgets for research and trans-European transport links. Britain has argued that the budget needs to be focused on more future-oriented programs such as research and education and less on agriculture.

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