The EU Commission fired more shots today in its battle to boost spending for the bloc in 2007-2013 with heavyweight member states such as Germany, France and Britain.
Presenting final details of its long-term budget proposal, the Commission warned member states that the EU would face financial chaos and serious political setback unless they resolve their heated dispute over spending by the end of June.
"My message today is that Europe must have the means to match its ambitions," Commission President Jose Manual Barroso said in a statement.
The Commission said major infrastructure, research and internal security projects would have to be scrapped if the bloc's budget was frozen at 1 per cent of gross national income from 2007, as demanded by the six biggest net payers.
The EU executive has proposed raising spending to 1.14 per cent of Gross National Income (GNI) on average in 2007-2013, or €930 billion.
But the EU's main net payers - Austria, Britain, France, Germany, the Netherlands and Sweden - argue that spending must not grow at a time when many governments are struggling with high budget deficits amid sluggish economic growth.
A string on elections and referendums on the EU's new constitution could mean that an agreement will come only at a last moment - late in 2006 after general elections in Germany.
Since it takes 12-18 months to prepare the legal bases for multi-annual funding programmes, a late agreement would mean about 40 per cent of the budget could not be executed in 2007.
The failure to reach a deal before 2007 would have even worse consequences as the EU would have to resort to horse-trading on annual budgets. "It ... would send a signal that the EU is not working," the Commission said.
The lack of an agreement would hit new member states hardest, since the annual spending after 2007 would be based on the 2006 bills, in which they do not yet fully enjoy rights to all EU regional aid programmes.