Deep divisions on display over post-Brexit EU budget

The traditionally gruelling negotiations are expected to be especially tough this time around, and Friday's discussions did not signal any movement on already entrenched positions.

"It was a stock taking meeting, everyone was repeating the positions we already knew, no new element, no guidance, nothing," EU commission president Jean-Claude Juncker told reporters after the meeting, ruling out a possible deal in December, which leaders had originally hoped to achieve.

"We are still a far cry from reaching an agreement," German chancellor Angela Merkel confirmed. Incoming budget commissioner Johannes Hahn said earlier that he wants to get the deal done by the end of winter.

Leaders talked about the most politically-sensitive issues: the overall size of the budget, the balance between different key policies such as agricultural subsidies and cohesion funds for less developed regions, linking funds to the respect of rule of law and climate incentives.

The spat on the overall figures splits the net contributors, such as Germany, Nordic countries, the Netherlands and Austria, that want to cap the joint budget at one percent of the gross national income, and those who want to see more spending.

Net payers argue that they would have to pay more even with a one percent cap to compensate for the loss of Britain's transfers.

Some eastern and southern states, which benefit from EU funds on poorer regions and agriculture, are keen to see a bigger budget, and say they are willing to contribute more.

Finland, which holds the rotating presidency of the EU and itself wants to see smaller budget, has already revised the commission's proposed 1.1 percent budget of €1.135bn downwards to €1.050-€1.100bn, between 1.03 and 1.08 percent in its latest plans.

Member states from both sides were unhappy with the Finnish proposal.

"It is normal that member states are furious at the proposal. As everyone is equally dissatisfied, the middle ground can gather support," a Finnish presidency source said.

Conditions

The Finnish presidency want to come up with detailed numbers for December summit, to kick of the haggling.

Making discussions more difficult, member states also grappled with the idea of including rules tying the distribution of EU funds to the respect of the rule of law.

Poland and Hungary, where nationalists governments had been taken to court by the EU over judicial reforms, are irked by the proposal. However, net contributors insist on the new tool.

The Finnish presidency will also have to specify what will be the scope of the "rule of law conditionality", whether it will be a specific or broad list of issues that can trigger the mechanism.

"The general rule will be the context of protecting the budget, " said the presidency official.