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UK threatened with £42m fine for missing EU surcharge deadline UK threatened with £42m fine for missing £1.7bn EU surcharge deadline
(about 14 hours later)
David Cameron has suffered a double blow on Europe as Germany declared that it would veto his plans to curb EU migration, and Brussels warned the UK would be fined if it refused to pay a controversial £1.7bn surcharge.David Cameron has suffered a double blow on Europe as Germany declared that it would veto his plans to curb EU migration, and Brussels warned the UK would be fined if it refused to pay a controversial £1.7bn surcharge.
Mr Cameron has declared he will not hand over the “growth tax” on Britain’s contributions to EU coffers by the 1 December deadline. George Osborne will urge fellow EU finance ministers to reduce and delay the bill when they meet on Friday in Brussels.Mr Cameron has declared he will not hand over the “growth tax” on Britain’s contributions to EU coffers by the 1 December deadline. George Osborne will urge fellow EU finance ministers to reduce and delay the bill when they meet on Friday in Brussels.
UK officials hope the European Commission will not impose late-payment fines totalling millions of pounds while negotiations continue over revised contributions for all EU member states, which take account of their economic growth in recent years.UK officials hope the European Commission will not impose late-payment fines totalling millions of pounds while negotiations continue over revised contributions for all EU member states, which take account of their economic growth in recent years.
But the Commission warned that Britain would risk adding to its £1.7bn bill through late-payment penalties which would increase each month if the deadline is not met.But the Commission warned that Britain would risk adding to its £1.7bn bill through late-payment penalties which would increase each month if the deadline is not met.
Margaritis Schinas, the Commission’s chief spokesman, said the legal procedures had to be followed to keep the EU budget balanced. “Each member state has to pay what is due,” he said. “If payment is not made by 1 December, there is a process of interest being accumulated”.Margaritis Schinas, the Commission’s chief spokesman, said the legal procedures had to be followed to keep the EU budget balanced. “Each member state has to pay what is due,” he said. “If payment is not made by 1 December, there is a process of interest being accumulated”.
The initial level of interest would be based on the rate of the affected nation’s central bank, plus an extra 2 per cent. For Britain, the interest on the first month’s outstanding bill would be 2.5 per cent – or £42.5m. The rate would then increase by 0.25 per cent for each month that payment is not forthcoming, so by the end of 2015 it  would reach 5.5 per cent.The initial level of interest would be based on the rate of the affected nation’s central bank, plus an extra 2 per cent. For Britain, the interest on the first month’s outstanding bill would be 2.5 per cent – or £42.5m. The rate would then increase by 0.25 per cent for each month that payment is not forthcoming, so by the end of 2015 it  would reach 5.5 per cent.
But Italy, which holds the EU’s rotating presidency, is keen to reach a compromise with the Commission. “This is not the end of the story,” said an Italian government source. “There is a widespread willingness to find a solution.”But Italy, which holds the EU’s rotating presidency, is keen to reach a compromise with the Commission. “This is not the end of the story,” said an Italian government source. “There is a widespread willingness to find a solution.”
Mr Cameron may be forced to water down his pledge last month to reform the EU’s freedom of movement rules after a spokesman for Angela Merkel, the German Chancellor, said the rules were “non-negotiable.”  Mr Cameron may be forced to water down his pledge last month to reform the EU’s freedom of movement rules after a spokesman for Angela Merkel, the German Chancellor, said the rules were “non-negotiable.”  
Steffen Seibert said Ms Merkel had always stressed that “we want an active and committed Great Britain in a strong EU” and that “fighting possible abuse of freedom of movement is a legitimate interest”. But he insisted that “freedom of movement in general must not be questioned – we see in that an important European achievement.”Steffen Seibert said Ms Merkel had always stressed that “we want an active and committed Great Britain in a strong EU” and that “fighting possible abuse of freedom of movement is a legitimate interest”. But he insisted that “freedom of movement in general must not be questioned – we see in that an important European achievement.”
Some British ministers believe Mr Cameron will now have to settle for further restrictions on benefits  to migrant workers rather than diluting the free movement principle. Downing Street said his view had not changed and that he would spell out proposals before Christmas.Some British ministers believe Mr Cameron will now have to settle for further restrictions on benefits  to migrant workers rather than diluting the free movement principle. Downing Street said his view had not changed and that he would spell out proposals before Christmas.
Mr Osborne insisted the German government understood “the disquiet among British people when you have people coming from other parts of Europe here to claim our benefits”. The Chancellor said: “What we’re going to address is this question of how freedom of movement operates in the 21st century. It was never envisaged that you would have such large numbers of people coming, people who don’t have job offers.”Mr Osborne insisted the German government understood “the disquiet among British people when you have people coming from other parts of Europe here to claim our benefits”. The Chancellor said: “What we’re going to address is this question of how freedom of movement operates in the 21st century. It was never envisaged that you would have such large numbers of people coming, people who don’t have job offers.”