EU leaders meeting in Brussels are reportedly approaching a compromise, moving closer to finally establishing a figure for the next EU budget, which will cover the period 2014-2020.

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The EU Council talks are drawing to a close today, having begun on Thursday with the aim of negotiating a figure for the budget, which has divided Europe's governments, as some powerful states are demanding deep cuts in EU spending, whilst others want to see spending preserved.

Although the finer points of a deal still need to be reached, the Council is said to have agreed on the broad principles of the budget framework after all-night talks. Early indications show states in favour of spending cuts appear to be triumphing, as leaders are said to be near to establishing a figure of €960 billion.

The figure is over €70 billion less than that first proposed by the European Commission, and, if passed, would mark the first cut in spending in the EU budget's history. The proposed figure would be a real terms cut from the 2007-2013 budget of €864.3 billion.

The €960bn figure also represents a cut of €12 billion from proposals discussed during talks in November, which ended in failure. In terms of actual spending, the budget could be as low as €908bn, which EU sources said would seriously hinder the ability of EU institutions to function, but the UK government wants to see spending lowered further still.

French President François Hollande and British Prime Minister David Cameron lead the two opposing camps in the talks; Cameron argues that EU spending should reflect austerity measures undertaken in many EU States whereas Hollande maintains that the budget should be preserved at current levels to protect economies hit by the recession, reduce disparity between the member states and promote "solidarity".

Although agriculture is likely to suffer under the reduced budget as the largest area of EU spending, accounting for 40 percent of the budget, French President Hollande has said he would not suffer cuts to farming and rural development support. France is the EU's number one agricultural producer and as such benefits most from funding delivered under the Common Agricultural Policy.

Once a figure is agreed upon by the Council, it will have to pass through the European parliament, and MEPs will be likely to oppose deep spending cuts. Parliament President Martin Schulz has warned that the further the budget figure falls from the Commission's proposals, the more likely MEPs will be to reject it.

Fate of CAP funding

However, opinions differ within Europe about what the fate of CAP funding will be, and where any cuts visited upon agriculture spending should be made.

Speaking in Brussels on Wednesday (6th February) during a meeting arranged by European farm lobby group Copa Cogeca, NFU policy director Martin Haworth said, "We have said all along that it would be unrealistic for us to expect the CAP to be exempt from the austerity measures that are being applied throughout the EU. What is key to us is that whatever settlement is finally reached, the terms and conditions applied to our farmers must not put us at a disadvantage with our major competitors. We are deeply concerned that the UK government continues to negotiate to have the powers to move up to 20 per cent of the money at national level from the UK's direct payments envelope into its rural development envelope."

However, Faustine Defossez, policy officer for the European Environmental Bureau said on Thursday that attempts to protect Pillar 1 (direct payments) spending could prove detrimental to other valuable EU budget items such as LIFE, Overseas Development Aid and rural development projects under CAP pillar 2, which often have more environmental and social impact. She elaborated, "In times of austerity Taxpayers expect a budget that can deliver jobs and public benefits. Protecting controversial Direct Payments at the expense of valuable policies such as Rural Development would further delegitimize the CAP in their eyes and be another nail in the coffin of the CAP in the long term."

Commenting on the progress of talks on Friday morning, Jeremy Wates, EEB Secretary General complained, "This is the worst of both worlds: a smaller budget that is explicitly dedicated to keep pumping money into Europe’s most wasteful and harmful policies and projects, in particular the CAP."

Although full details of the Council's conclusions are expected on Friday night, talks could easily run over into Saturday morning. Renewable energy and environment groups have expressed concern that spending on low carbon initiatives, energy projects intended to facilitate transition to a 'low carbon economy' and conservation measures could also suffer as a result of budget cuts.