Stage set for budget showdown as MEPs back spending hike

They also voted to keep spending on the controversial common agricultural policy and cohesion funds aimed at the poorest regions of the EU at their 2007-13 spending levels. They also want to ensure that the planned financial transaction tax, set to be adopted by eleven member states, is considered with VAT as an 'own-resource' to be used to reduce the budget contributions of the countries using it.

The seven year Multi-annual Financial Framework (MFF) sets the ceiling for up to €1 trillion of EU spending between 2014 and 2020, estimated at 1.03% of EU GDP. Five north European countries, led by Germany, France and the UK, insist that they will oppose any increase of the seven year budget cycle above the inflation rate.

A special EU budget summit has been convened for the 22-23 November in a bid to agree a negotiating mandate for the member states who will then do battle with a three-man team led by French centre-right MEP, Alain Lamassoure, from the Parliament's Budget committee.

Bulgarian centre-left member, Ivailo Kalfin, another of the EU assembly's budget team, said "the EU budget is an investment tool to support long-term development and strategic European co-operation." In a sideswipe at member states, he added that funds were needed to put the much heralded 'Growth and Jobs pact' agreed by EU leaders in June, into reality.

Meanwhile, in a veiled threat to UK Prime Minister David Cameron, German centre-right deputy Reimer Böge warned that failure to reach agreement would be "very costly for the UK". If a deal between governments and the parliament is not reached the 2013 budget would roll over into 2014, with an automatic 2 percent inflation-based increase.

The parliament also defied member states on the 2013 settlement, backing the Commission proposal for a €9 billion increase on 2012, taking the budget to €138 billion. The EU executive has argued that the extra cash is needed to cover bills for existing projects agreed by member states.

The commission also published plans for an emergency budget to plug an estimated €9 billion shortfall for payments.

Polish EU Budget Commissioner Janusz Lewandowski blamed national governments for the funding shortfall, telling them that the extra cash was needed because "you spent too much" and stating that the budget was needed to reimburse payments made by member states.

"I have repeatedly warned that constant cuts in the proposed budget will eventually create a big problem. This time has come. Our situation does not allow us to deliver on our agreed commitments," he said.

Ministers and MEPs should "now take their responsibilities since they voted an EU budget below its needs," he added.

The EU executive confirmed that the Erasmus programme, which funds students to take courses in other EU countries, needed a €90 million injection to maintain payments, while €423 million was needed for research programmes "in order to pay in time and avoids interest on delayed payments."

Lewandowski singled out Spain and Italy for making late payment requests that could not be covered by the 2011 budget and had been rolled over onto the 2012 deal.

However, national governments will only be asked to contribute €5.9 billion, with most of the remaining €3.1 billion expected to come from fines resulting from anti-trust and competition policy violations.