A dispute between European Union President Britain and the EU's executive Commission over future spending burst into the open yesterday during negotiations on the bloc's draft 2006 budget.
The Commission blasted a proposal by EU governments, made yesterday under Britain's stewardship, to cut nearly €1.2 billion from the draft of €112.6 billion, saying it would harm many pro-growth projects and lead to a hiring freeze at the EU executive.
The dispute augured ill for more important talks on the EU's 2007-2013 spending plan, which broke down at a summit in June after a row between Britain and France over London's rebate from Brussels coffers and future farm spending levels.
"It is shame that the Commission had a go at the (British) presidency," said Britain's Economic Secretary to the Treasury, Ivan Lewis, referring to critical remarks by EU Budget Commissioner Dalia Grybauskaite and comments by her spokesman.
"I regret the Commission launched an attack on the presidency," he told a news conference, with Ms Grybauskaite, a former Lithuanian finance minister, sitting at his side.
He added that, in spite of the latest row, Britain should be able to secure a deal on the 2007-2013 budget before its presidency ends in December. Many diplomats believe there will be no agreement until June next year. Senior officials from 25 EU finance ministries, launching the 2006 budget draft's first reading, earlier demanded a lowering of next year's spending to 1.01 per cent of Gross National Income from 1.02 per cent, compared with the Commission's proposal.
They also authorised unlocking €170 million in EU aid funds from the tsunami victims in Asia.
Mr Grybauskaite deplored the fact that cuts of 516 million euros would be applied to spending on research and development and smaller administrative savings would prevent the Commission from hiring new staff despite the bloc's enlargement last year.
"Reasearch and development projects will suffer... There will have to be a freeze on new hiring next year," she said.
Mr Lewis said that overall EU spending on research and development would still grow by 12 per cent, although not by 22 per cent as the Commission proposed.
He noted that the Commission was unable to hire this year's quota of 640 staff from countries that joined the bloc in 2004.
In another sign of bad blood in the budget negotiations, Germany distanced itself from the draft approved by EU governments, saying it did not envisage enough spending cuts and failed to trim controversial farm aid programmes.
"A draft that allows spending to increase 4.8 per cent year on year is not appropriate," Deputy Finance Minister Caio Koch-Weser said in a statement.
Germany, the Netherlands and Austria abstained in the vote on the budget.
Under complex EU Budget approval rules, national governments' representatives will now negotiate with the European Parliament on the final spending levels. Parliament will vote on the budget in December.