Finland’s plans for post-Brexit EU budget unite European leaders in chorus of disapproval

EUROPEAN Union leaders have discussed a new budget plan that could allow the EU to spend up to €1.1trn in the 2021-27 period, but deep divisions among governments may block a deal for months.

Under a proposal prepared by Finland, which holds the EU’s rotating presidency, the next longterm budget should have a financial capacity between 1.03pc and 1.08pc of the bloc’s gross national income (GNI), a measure of output.

That would allow the EU to spend €1trn to €1.1trn for seven years in its first budget after the departure of Britain, one of the top contributors to EU coffers. After the meeting, some EU leaders and officials described the talks as difficult. The Finnish document, seen by Reuters, is less ambitious than proposals put forward by the European Commission, which is seeking a budget worth 1.1pc of GNI. The EU parliament called for an even bigger budget, at 1.3pc of GNI.

But the Finnish proposal moves beyond a 1pc cap set by Germany, the largest EU economy. It has displeased most of the 27 EU states, officials said, suggesting long negotiations before a compromise can be reached.

Talks on budgets are usually among the most divisive in an EU increasingly prone to quarrels.

Member states are deeply split over economic policies, financial reforms and how to handle migrants. The Finnish proposal, which cuts spending on farmers and poorer regions, has managed to unite the divided EU leaders in their criticism.

“The text has caused nearly unanimous dissatisfaction,” a diplomat involved in the talks said.

New, expensive policies, such as protecting its borders and increasing social security, have been enacted, but states are reluctant to pay more.

Germany and Nordic supporters of a smaller budget argue that because of Brexit, they would pay more into the EU, even with a 1pc cap, because they would need to compensate for the loss of Britain.

Eastern and southern states, who benefit from EU funds for poorer regions and agriculture, want a bigger budget and are not happy with Finland’s proposed cuts in these sectors.

Under the proposal, subsidies to poor regions would drop to less than 30pc of the budget, from 34pc now. Aid to farmers would fall to slightly more than 30pc from over 35pc of the total.

To complicate matters, the new budget could also include rules that would suspend funding to member states with rule-of-law shortcomings, such as limits on media freedom or curbs on the independence of judges.

This is irking states like Poland and Hungary, which Brussels has accused of breaches in the rule of law, after judiciary and media reforms adopted by their right-wing governments.

Divisions are so deep that many officials fear a deal may not be reached by a self-imposed December deadline.