November 14, 2012 / 9:53 AM / 5 years ago

British rebate safe in latest EU budget compromise plan

* Proposal cuts 80 billion euros from original plan

* Infrastructure funds would be hit hardest

* More wrangling likely ahead of Nov. 22 summit

BRUSSELS, Nov 14 (Reuters) - The European Union would maintain Britain's rebate and make further cuts in overall spending in its next seven-year EU budget, according to the latest draft compromise seen by Reuters on Wednesday.

The proposals, made by European Council President Herman Van Rompuy, could help appease Britain and other austerity-minded governments keen to limit their contributions, as the bloc tries to reach a deal ahead of a summit on Nov. 22-23.

But further cuts - proposed by Britain, Sweden and others - to farm subsidies and development funds for poorer countries are likely to face opposition from France and former communist Eastern European states.

"The existing correction mechanism for the United Kingdom will continue to apply," said a draft proposal sent to capitals late on Tuesday. Linked rebates for Germany, the Netherlands and Sweden would also remain, but Austria would lose its refund.

The draft outlines further cuts of about 27 billion euros from a proposal drafted by the Cypriot EU presidency at the end of last month.

The Cypriot plan already reduced the roughly 1 trillion euro ($1.3 trillion) budget proposed for 2014-2020 by more than 50 billion euros, meaning the overall reduction from the European Commission's original plan now lies at about 80 billion euros.

That is unlikely to be deep enough to satisfy countries like Britain, Sweden, and the Netherlands, who are pushing for cuts of between 100-200 billion euros to the Commission blueprint.

The deepest cuts in the latest proposal fall on EU cohesion funds used for building motorways, bridges and other infrastructure projects in less developed regions, which have been reduced by about 17 billion euros.

Farm spending, which had been left largely untouched in the Cypriot compromise, is reduced by nearly 15 billion euros in the Van Rompuy proposal, including a cut of 8 billion euros in direct subsidies.

France has long threatened to oppose any plan that reduces payments to farmers, which currently account for about 40 percent of all EU spending.

But Britain, Sweden and others would like the EU to reduce spending on farm subsidies to free up funds for research, energy projects and other measures to boost economic growth.

"The revised proposal means some small steps in the right direction but it's not enough," Sweden's EU Minister Birgitta Ohlsson said in a statement on the proposals. "We need a clear model for reducing agriculture subsidies."

The proposal from Van Rompuy also suggests that two-thirds of receipts from a new financial transaction tax planned by about a dozen EU countries should be paid directly to the bloc's budget, in return for an equivalent cut in those countries' national contributions.

But the idea is unlikely to win the support of the countries involved.

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