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EU in budget setback after Parliament rejection

Raf Casert, Associated Press

Germany's Finance Minister Wolfgang Schauble talks with journalists as he arrives for a Eurogroup meeting in Luxembourg, Thursday, June 20, 2013. (AP Photo/Geert Vanden Wijngaert)

BRUSSELS (AP) -- The European Union suffered a setback Thursday after the major parties in its parliament rejected a tentative deal on a seven-year 960 billion euro ($1.27 trillion) budget that is supposed to kick in next year.

The thumbs-down from the four biggest groups in the legislature extended the problems for the 27 EU nations, which have been trying since last fall to cobble together a budget for the years 2014-2020 at a time when many of them are mired in recession. At the same time, a reinvigorated legislature has been clamoring for more clout in the way the EU is run.

The Christian Democrats, Socialists, Liberals and Greens all said the conditions laid down in a provisional agreement reached Wednesday could not get their full backing. The Parliament's budget rapporteur, Reimer Boege, even said he would resign from his post, saying the financial elements of the deal on the table were "nothing more than a manipulation."

Socialist leader Hannes Swoboda said his party "will not take a rushed decision."

Time is pressing though for a deal that would represent the first cut in spending in the EU's history, to the dismay of many parliamentarians. The budget sets what the EU can spend on everything from infrastructure, farming to development aid and employment measures.

"We need a result soon, we need clarity," said Germany's Finance Minister Wolfgang Schaeuble. "We don't want to save up the youth unemployment funds for a rainy day, but fight youth unemployment now," Schaeuble said in Luxembourg.

The legislature needs to back February's agreement by EU leaders and has asked for more money and more say in the way the budget will be run. The main parties also want a midway review to assess the changing conditions.

"Parliament has made clear what it wishes for, but not all wishes can be fulfilled," said Austria's Finance Minister Maria Fekter.

The rejection represents a setback for Ireland, which hoped it would crown its six-month presidency of the EU that ends at the end of this month with a comprehensive budget agreement.

The discussions over the budget have lasted for months — before February's agreement, EU leaders had failed to agree a deal last November.

On one side, countries like Britain have argued that in a time of austerity the EU budget is a drag on national coffers, while others like France said the economic crisis highlighted the need for closer and deeper ties, which would compel the EU to do more than in the past.

Separate from national spending, the EU budget is designed in part to balance out the economic development of its members by injecting funding into poorer countries. The EU has funded thousands of infrastructure and capital projects over the years, from the installation of broadband networks to the upgrade of road networks.

The EU budget also includes items meant to generate economic growth, such as research and development, increasing digitalization and creating a new, more accurate satellite navigation system. It also funds regulation and administration in such areas as mergers and competition, the review of national budgets to ensure they do not include excessive deficits and banking supervision.

If the EU fails to agree on a seven-year deal ahead of the end of the year, the EU would have to revert to annual budgets which would make long-term planning difficult.


Associated Press writer Juergen Baetz contributed from Luxembourg.