European Parliament negotiators failed to overcome opposition from the UK and the Netherlands to the 2011 budget yesterday night (15 November), calling into question funding for ambitious projects such as the EU diplomatic service and the ITER nuclear reactor. Negotiations between the European Parliament and the EU's 27 finance ministers collapsed at midnight over some countries' insistence on more austerity in the bloc's finances. If the impasse continues, the 2011 EU budget will be maintained at this year's level and disbursed monthly in 12 equal installments. The last time this happened was in 1988. Sources close to the negotiations told EurActiv that the impasse was caused by the intransigence of London and The Hague, which insisted on more austerity in the EU budget, in line with spending cuts introduced in most EU countries to fend off the crisis. Similarly, the "stubborn" attitude of European Parliament President Jerzy Buzek contributed to the failure of the talks, despite the conciliatory approach taken by the chair of the EU assembly's budget committee. French European People's Party (EPP) MEP Alain Lamassoure.A consensus seemed to have emerged on increasing the 2011 budget by 2.91%, a figure supported by London and accepted by eleven other countries at an October EU summit (see 'Background'). But problems emerged on the issue of a so-called 'reallocation flexibility' mechanism, which allows reserve funds to be used up to a maximum of 0.03% of Gross National Income (GNI). The mechanism, which has been in place for many years, allows for up to 0.03% of the bloc's GNI to be tapped into with the approval of EU member states voting by qualified majority. Nevertheless, some countries insisted that any payments should be agreed by unanimity. Seen from the MEPs' perspective, London wants to make unanimous voting the rule in decisions to reallocate flexible spending. Discussions over this issue took two hours, sources said, with the Parliament insisting that decision-making in the EU should not be more difficult under the Lisbon Treaty than under previous rules. London asked for the issue to be addressed at an EU summit on 16-17 December, diplomats said. Failure to agree on the reallocation flexibility endangers the financing of programmes such as ITER, an international project to design and build an experimental fusion reactor in France, a source explained. Another payment which now appears to be in jeopardy is a commitment to pay 190 million euros to banana-producing countries following a decision to discontinue preferential import tariffs. Similarly, 300 million euros of compensation to Bulgaria for having closed down four of its nuclear reactors also hangs in the balance. The usage of 'unspent' funds from the EU budget, such as the recent five billion euro package for clean energy and broadband Internet, would also be discontinued, according to Parliament sources.Another issue in the discussions was the Parliament's demands for a seven-point "political commitment," including 'own resources' for the EU budget after 2013 which could be financed by a new EU tax. But ministers rejected that demand, insisting that the issue was not in their mandate.Should EU leaders fail to find a compromise at the December summit, a 'roll-over' of the current budget will apply. Speaking at the meeting, EU Budget Commissioner Janusz Lewandowski warned of many problems to be expected, such as financing the External Action Service and the four financial surveillance bodies put in place to avoid new crisis situations in Europe. Payments under the Common Agricultural Policy (CAP) would also be in jeopardy, as major payments are made in January and February for which the usual monthly installments will not suffice, he warned. The Lisbon Treaty provides for increasing monthly instalments for specific proposes, but this would require a Commission proposal, a vote in the Council and approval by the Parliament. The Commission now needs to propose a new draft budget. There is no official deadline for this, but the EU executive will probably do so as soon as it can. After that proposal has been tabled, the Council must adopt its position and will probably aim for an agreement at the 16-17 December summit of EU leaders.