EU set to defer British budget bill after Cameron warning

BRUSSELS - European Union finance ministers looked set Friday to allow Britain to defer a massive 2.1 billion euro (S$3.4 billion) surcharge as Prime Minister David Cameron warned of a "major problem" if his demands were not met.

France suggested that a Dec 1 deadline for repayment of the surcharge, which Cameron has refused to meet, could be extended until Sept 2015 at a meeting in Brussels.

But Cameron, under pressure at home ahead of elections in May, said both the deadline and amount were unacceptable and could cause his increasingly eurosceptic country's exit from the EU in a 2017 referendum.

"The two elements that I said were absolutely clear were that we wouldn't pay two billion euros on December 1 and we didn't believe in paying anything like that amount," Cameron said at the Northern Future Forum in Helsinki.

"I hope they can be resolved... and if they can be then that'll be good, and if they can't - then obviously we'll have a major problem," he said at the Northern Future Forum in Helsinki.

The surcharges are based on a recalculation of member states' budgets over several years, also affecting countries such as the Netherlands and Italy, with punitive interest charges for any country that does not cough up.

France, Germany and several other countries are meanwhile set for a payout under the new rules, fuelling London's anger.

The row has overshadowed new European Commission chief Jean-Claude Juncker's first week in office, with Juncker accusing Cameron of having a "problem" with other leaders after the British premier brought it up at the October summit.

EU officials have said they are keen to keep Britain in the 28-nation bloc, but there are increasing signs that they are tiring of his demands, which also include limits on immigration.

A proposal to allow Britain to pay the bill in instalments was introduced Friday by Italy, which holds the rotating presidency of the EU, at the meeting of finance ministers.

French finance minister Michel Sapin said other EU nations were ready to be flexible.

France backs compromise

"We, France, have supported a position of compromise which is that where the sums are exceptional they could be paid over the next year and before the 1st of September," Sapin said.

But haggling over the details continued, with Britain seeking an end-of-2015 deadline that would take it well past elections, while the Dutch wanted it in September to avoid a budget debate in December that year, an EU official said.

Deficit-hit France meanwhile wanted the money next year to help with its budget, while Italy wants it this year, the official said.

"Cameron's game is clear. He is refusing to pay what he has to before the elections to show that he can stand up to Brussels. If he's re-elected then he can pay, if not he'll pass the buck," another European official told AFP on condition of anonymity.

Conservative Cameron, who has vetoed several EU financial moves at summits in recent years, is under threat from the eurosceptic UK Independence Party of Nigel Farage ahead of a general election in May.

Cameron has promised to hold an in-out referendum on membership of the EU by the end of 2017 if he is re-elected.

But there is growing annoyance at his general tone with the rest of Europe, with German Chancellor Angela Merkel reportedly saying that immigration curbs sought by Britain are a "red line". -

Cameron 'unbearable'

"He is unbearable," one European diplomat told AFP of Cameron after the British leader's comments on the bill following last month's summit.

Meanwhile a global tax breaks controversy surrounding Luxembourg and Juncker, who was the tiny EU country's prime minister before joining the Commission, hung over the meeting of ministers in Brussels.

Household names such as Pepsi, IKEA and Deutsche Bank were among companies named by the US-based International Consortium of Investigative Journalists (ICIJ) following a six-month investigation of 28,000 leaked documents.

The European Commission said it was already investigating Luxembourg's tax deals, while a spokesman for Juncker said he was unfazed.

Juncker presided over the tax affairs of Luxembourg at the time when the tax deals were brokered, transforming the country from a sleepy European backwater into a prized destination where the world's biggest companies channel their affairs.