EU deadlocked over budget plans

Europe’s foreign ministers remain divided over future EU spending plans after failing to break the deadlock on compromise proposals at a meeting in Brussels on Sunday.

The Luxembourg EU presidency proposals, tabled over the weekend, did not get the backing of the EU’s six major contributors, Germany, the Netherlands, the UK, France, Austria and Sweden.

The six national capitals want to cap their payments to the EU’s coffers at one per cent of GDP.

The European Commission wants to set the EU's future expenditure, the so-called 'financial perspectives' to an average 1.14 per cent of GNP over a seven year period.

Commission President Jose Manuel Barroso said he was "very disappointed" by the Luxembourg Presidency’s proposal to limit the EU's budget to 1.1 per cent.

Barroso insisted, “the budget is not an abstract set of figures, it has hard policy consequences.”

If no agreement is reached between Brussels and member states at a summit of of EU leaders in Brussels on June 6, negotiations are likely to run into 2006 and could plunge Europe into a cash crisis.

Germany may scupper any deal after Gerhard Schröder’s party suffered a massive defeat in regional elections in North Rhine Westphalia on Sunday.

The result puts the Social Democrats out of power in the country’s most populous state for the first time in almost four decades. 

The beleagured Chancellor is expected to call an early election and is unlikely to be seen as giving in to 'Brussels' budget demands during a national election.  

The UK is also likely to stick to its line on British rebate during its presidency, beginning in July, which also lowers the chances of reaching agreement.

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