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Last Updated: Sunday, 15 May, 2005, 00:27 GMT 01:27 UK
EU fails to agree on new budget
French Finance Minister Thierry Breton
France was one of the countries which opposed higher contributions
European Union governments have failed to agree on how to finance the organisation over the next decade.

Finance ministers meeting in Luxembourg made no progress towards drafting a seven-year budget to run from 2007, the year of the next round of enlargement.

The European Commission says spending must rise to meet the need of financing poorer eastern members.

But Germany, whose sluggish economy contributes most to the EU, says the sums involved are too high.

France, the UK, Austria, the Netherlands and Sweden have supported the Germans in calling for the budget to be kept at a level of 1% of the EU's gross national income.

The commission had proposed a limit of 1.14%.

"I'm happy to be able to announce to you an agreement, in the sense that it is clear that we don't agree," said Luxembourg Prime Minister Jean-Claude Juncker after the meeting.

"And I expect this will remain the situation until the very last minute."

Correspondents say the argument is becoming increasingly bitter, and that failure to agree a budget soon will endanger the EU's spending plans as it prepares to take in new members.

The UK has meanwhile said it will not give up its own special deal.

The deal was negotiated in 1984 by then prime minister Margaret Thatcher as a mechanism to refund part of the UK's payments.

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