EU suspects Brexit mind games in UK veto on budget

By Alastair Macdonald

BRUSSELS (Reuters) - The European Union called on Britain to lift a pre-election veto on some EU spending, warning it could disrupt the start of Brexit talks, and EU officials suggested London was needling Brussels ahead of negotiations.

European Commission President Jean-Claude Juncker told reporters on Saturday, after a Brussels summit where EU leaders approved instructions for their negotiator, that Britain had blocked billions of euros (dollars) in EU spending last week.

"It would be desirable and it would facilitate the beginning of the negotiations if the UK were to be able to withdraw the reserve it has entered," Juncker said, referring to talks on Britain's 2019 exit from the EU.

They are expected to begin after a parliamentary election on June 8, which Prime Minister Theresa May called this month hoping that an increased majority will strengthen her position.

British officials said it was due to the election that its diplomats informed the EU on Tuesday that they could not approve a package of some 6 billion euros ($6.5 billion) in spending measures on Wednesday, out of respect for the pre-vote "purdah" when ministers hold off deciding on "sensitive issues".

A British official said: "This has nothing to do with a change in position. We sought to delay a vote on a sensitive file in keeping with our pre-election protocol."

However, EU officials were not convinced, saying the veto appeared unprecedented and affected policies that Britain had agreed during months of prior deliberation: "This is clearly not a technical decision," one said. "It could be a show of force."

Among measures affected was 2.5 billion euros for bolstering EU frontier controls to deal with the migrant crisis in the Mediterranean and 1.4 billion euros to tackle the "root causes" of migration in poor nations -- a policy Britain strongly backs.

Further spending on youth employment initiatives, student exchanges and scientific research were also hit.

The move was seen as a poor omen in Brussels for two years of difficult talks on a tight timetable. Officials said chief negotiator Michel Barnier again warned of the risk of an acrimonious collapse, meaning no deal is reached -- a scenario for which the negotiating guidelines say the Union is prepared.

Without a deal, Britain would simply drop out of the EU in March 2019 and into a potentially chaotic legal limbo. May has said she would prefer no deal to a bad deal but EU officials believe she will try to avoid that, arguing that stalemate would be more damaging to Britain's interests than to the Union's.

Adding to a sense of irritation in Brussels with the British spending block, one EU official said, was the late arrival of an email announcing it on Tuesday evening, a week after May called the election and hours before EU ambassadors were to meet on Wednesday morning to simply wave through the budget measures.

That, and the fact the email signed off: "Happy Easter."

(Editing by Robin Pomeroy)