CAMERON WILL HAVE TO MOVE ON EU BUDGET

David Cameron claimed it as "a great victory" and a done deal when the
European Council (the prime ministers of Europe) agreed an
inflation-only increase of 2.9% in the size of the 2011 EU Budget. But
he ignored the fact that the Lisbon Treaty gives equal budget-making
powers to the European Parliament.

Negotiations opened, and MEPs quickly dropped their call for the 5.9%
increase needed to meet all commitments. An increase of 2.9% could be
supported they said, but only in return for concessions.

The Lisbon Treaty doesn't spell out how the Parliament will be involved
in future budget making, so this round of negotiations will create a
precedent for decades to come. MEPs want a formal procedure for
dialogue to be established that will embrace annual budgets and the
making of long term financial plans, including the way EU expenditure is
financed. When the Council flatly refused to discuss this, negotiations
between the two bodies broke down.

Now a procedure called "minimum 12" has been adopted. It means that the
EU in 2011 will be run, month by month, on the basis of a zero increase
on the 2010 budget. This will mean indefinite delays in new initiatives
such as the creation of the EU's diplomatic service, but it also means
that the bills can't be paid.

Some 80% of EU money is spent by national governments. Even by the end of February the Commission will be unable to pay all agricultural subsidies; support for other projects will be
curtailed a little later. Some governments, including those in
financial difficulties, may then have to meet the obligations by
borrowing money on the open market at high rates of interest.

The Council is not united; Britain and the Netherlands are the two
countries refusing to concede anything to meet Parliament's demands. By
contrast, Parliament appears at present to be united and determined.
One of my MEP colleagues, who happens to be the former prime minister of
Lithuania, told my Liberal Democrat colleagues that if the Parliament
doesn't now establish a procedure for the making of future budgets we
might as well give up and go home.

David Cameron may be resolute now. Wait and see what happens when his
phone is hot with other prime ministers whose bills are not getting
paid.