Talks between the heads of the EU's 27 member states ended in failure on Friday (23rd November), as participants failed to reach an agreement on whether to cut or preserve EU spending over the next budget period (2014-2020).

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The collapse of budget negotiations, which took place over two days in Brussels, means further talks will have to go ahead next year. This will further delay negotiations over Common Agricultural Policy reform, which the European Parliament has said will not go ahead until a figure is established for the next EU budget.

There is a division of opinion in Europe’s national governments over what direction the union should take during the next budget period. The richer Western states, including Britain, Germany and Sweden want to reduce spending, whilst newer entrants, Southern and Eastern states, and France want spending preserved.   

The Northern nations had argued cuts in EU spending must reflect austerity measures undertaken in individual states. However, Southern states argued their stance is an ideological one; the states demanding cuts are led by the British government which is seeking to remodel government domestically and in Europe in line with its own neoliberal beliefs. The states in favour of preserving spending maintain that cohesion funding (which allocates money to development and infrastructure, aiming to reduce disparity between poorer states and more established EU members) is essential for creating a strong EU, especially in times of crisis.

In the wake of the collapse, senior EU figures including Council president Herman Van Rompuy (whose budget proposals were subject to wide-ranging criticism going into the talks) and German Chancellor Angela Merkel played down the impact of the stalled negotiations, claiming it is understandable that such a complex issue should take two attempts. In Merkel’s words, "it is not dramatic if we take only a first step today. If we need a second round, [we must] devote the time to it." 

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