Rompuy warns Cameron over sensitive budget issues

The European Union's top official fleshed out his ideas for a separate budget for euro zone countries on Thursday, and indirectly warned British Prime Minister David Cameron about using the proposal for his own political gain. 

At a conference to discuss the state of Europe after nearly three years of debt and financial crisis, Herman Van Rompuy, the president of the European Council, said a separate euro zone budget was an idea that needed close examination. 

Even if it is a long-term project and there are a host of political and financial obstacles to overcome, it could help underpin the stability of the single currency, he said. 

"We have to do everything to stabilise the situation in the euro zone, and if a fiscal capacity or a separate budget can help and can contribute to this stability, then you have to reflect on it, to discuss it," he told conference delegates, who included several ministers from EU member states. "Every currency union needs also a fiscal capacity, and certainly a fiscal capacity to stabilise the euro zone."

The 27 countries in the European Union currently finance a budget which amounts to around 130 billion euros a year - 1 percent of EU output - and which is used for spending on agriculture, science, infrastructure and other areas.
But there is no equivalent budget among the 17 countries that share the euro, a shortcoming that many economists believe has undermined the stability of the currency project.
Van Rompuy first raised the possibility of a separate euro zone budget in September and developed his thinking in a document sent to EU capitals in early October. It forms part of a series of initiatives to try to resolve the debt crisis.
Germany and France strongly support the proposal and, in a surprise to many EU diplomats, Britain does too, but for different reasons. Cameron sees a euro zone budget as a way of further separating Britain and its increasingly EU-sceptical electorate from the currency bloc and its problems.
He also sees a euro zone fund as a way of potentially reducing the amount Britain has to pay into the EU budget, which is negotiated annually as part of a seven-year framework. The issue has become particularly acute as the EU prepares to negotiate the next seven-year plan at a summit in November, a deal Cameron has threatened to veto unless he gets his way.
"There will come a time when you need to have two European budgets, one for the single currency, because they are going to have to support each other more, and perhaps a wider budget for everybody else," Cameron said on Sunday, the first day of his Conservative Party's annual conference.
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