Business, Economics and Jobs

Battle looms over Europe's fiscal future with budget talks


Protesters opposed to austerity measures imposed by the government demonstrate on January 14, 2012 in Bucharest, Romania. Romania has slashed public wages and raised taxes in attempts to cut its budget deficit and meet pledges to both the International Monetary Fund and the European Union.


Mugur Varzariu

It's a mad, mad, mad, mad Europe when it comes to the budget, with nations to go head-to-head on the bloc's economic future at a Brussels summit Thursday and Friday, said The Guardian

With European markets still reeling from the debt crisis, top economic contributors -- notably Britain -- are demanding big spending cuts as nations debate their shared trillion-euro budget, according the BBC News

Lead by an increasingly vocal Britain, the Netherlands, Sweden and Germany are also pushing for harsher austerity measures and threaten to block consensus on spending unless assured the bloc's long-term fiscal health will be addressed, said BBC.

That much seems to be on the agenda, according to the man leading the Brussels event. European Commission President Herman Van Rompuy has promised that, "for the first time ever - there will be a real-terms cut compared to the current budget," according to BBC

That's not what anti-austerity France wants to hear, but the Guardian said Germany's Merkel is meeting with France's Hollande ahead of the summit in a bid to hammer out differences. 

It'll be tough to broke a compromise. Hollande recently came down on nations calling for "swinging cuts" but who want to keep their rebates, remarks widely seen as directed at Cameron's Britain and referring to Margaret Thatcher's 1984 budget rebate deal, said the Guardian. (Britain gets a yearly rebate worth some three billion euros, according to BBC.)

Eastern European countries are also likely to resist certain spending cuts with an eye on EU grants and other support for development. 

Now, this is nothing new. The bloc's budget talks are notoriously fractious, but to be fair Rompuy is trying to put a fresh spin on things by not pre-releasing the proposed budget. This means member states won't see key paperwork until everyone's literally sitting around the table, the idea being to limit pre-summit wrangling, said BBC

The future of the bloc's young euro currency, meanwhile, remains in question. European stocks have rebounded somewhat after a rough year, but Forbes said the market may be falling prey to a false sense of confidence, writing: "While the European sovereign debt crisis has flown below the radar, the Eurozone continues to contract and, despite improvements, Italy and Spain are still stuck with stagnating economies.