EU Talks on Its Future Budget Collapse

Talks on the European Union's budget collapsed in acrimony Friday, abruptly ending a summit that diplomats had hoped would pull the EU out of its constitutional dilemma. Top European leaders blamed each other for the breakdown but agreed the bloc was "in a deep crisis."

The failure to agree on a budget for 2007-2013 reinforced impressions that the 50-year process of EU integration has lost direction after the French and Dutch referendums in which voters rejected a proposed EU constitution. Leaders of the bloc's member states failed to resolve strident disputes over spending and did not present a clear plan to save the constitution.

Luxembourg Prime Minister Jean-Claude Juncker said early Saturday that in coming weeks EU diplomats and others "will tell you that Europe is not in crisis. It is in a deep crisis," he said after the two-day summit.

European leaders did agree Thursday to postpone the November 2006 deadline by which all members were to have ratified the charter, a roadmap to further the political and economic integration of Europe. They said the extra time would be used to digest the French and Dutch referendums nearly three weeks ago.

But on Friday, Britain refused to surrender its annual rebate and several other nations demanded financial relief. French President Jacque Chirac said he "deplored" Britain's attitude during the tense negotiations.

German Chancellor Gerhard Schroeder said, "We are in one of the worst political crises Europe has ever seen. We could not get an agreement because of the stubbornness of Great Britain and the Netherlands."

British Prime Minister Tony Blair dismissed suggestions that Britain was the main cause of the summit's collapse, insisting four other countries also were unable to reach agreement.

In what appeared to be a veiled reference to Chirac, Blair said: "I'm not prepared to have someone tell me there is only one view of what Europe is."

Blair had said he would only consider changes to the rebate - worth about $5.5 billion annually - if the European Union agreed to overhaul agricultural subsidies, which account for more than 40 percent of the EU's budget. The Netherlands and Sweden also demanded relief, complaining their annual payments to the bloc were too high.

Blair argued it is necessary to balance the outsized agricultural subsidies that flow far more generously to France and other continental countries than to Britain. France in particular insisted that Britain's rebate - won two decades ago by Margaret Thatcher - should be eliminated.

In a sign of how much the EU's new members were prepared to go to clinch a deal, Poland, the Czech Republic and eight other eastern nations offered funds destined for them to their rich western partners.

Chirac praised the 10 nations that joined the EU last year, saying their offer to give up money to get Sweden, the Netherlands, Finland and Britain to agree to a budget deal contrasted with "the selfishness of two or three rich states."

Czech Prime Minister Jiri Paroubek said most countries reacted by "telling us that it's unacceptable."

Juncker said he was "ashamed" that poor EU nations had to offer to cut their funding to please the rich.

The budget dispute soured the second day of summit negotiations, pitting Britain against France.

Blair rejected a plan floated by Juncker, the summit host, calling it too ambiguous regarding reforms of farm subsidies.

Juncker had suggested raising the rebate to $6.7 billion, then freezing it until 2013, but Blair's spokesman said he did not offer enough in exchange.

European Commission President Jose Manuel Barroso had warned earlier this week that the European Union would face "paralysis" if it failed to restore momentum to its bid to adopt a constitution.

Britain currently contributes $14.9 billion annually - or 12.1 percent of the EU budget - but receives $5.5 billion of that amount back in the rebate - a privilege other EU leaders say is outdated and unfair.

Failure to agree on the EU budget, worth some $120 billion annually, deepened the sense of crisis.

Barroso had said it was vital for leaders to reach agreement - even an imperfect one - to show that Europe is working despite the constitution rejections and news that two more countries will put ratification on hold. All 25 EU nations must approve the charter before it can take effect.

The Netherlands, Germany, France, Austria, Sweden, and Britain all contribute more to the EU budget than they get back in benefits. They want spending in 2007-2013 capped at 1 percent of the EU's annual gross national income.

Here is the BBC report.

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ast Updated: Saturday, 18 June, 2005, 01:36 GMT 02:36 UK

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EU 'in crisis' over talks failure

The French president was scathing about the British stance

The EU is in "deep crisis", says its current President Jean Claude Juncker, after budget talks broke down over a bitter row between the UK and France.

France condemned the UK for rejecting a deal to have its EU rebate frozen.

President Jacques Chirac said he "deplored" Britain's "pathetic" desire to "keep the entirety of its cheque".

Britain argued that any deal must be linked to reform of EU farm subsidies - but France, the biggest beneficiary of those subsidies, rejected this.

One compromise offered by Luxembourg was turned down by Britain; another was described by a British official as "even worse".

Afterwards, Luxembourg's leader, Jean Claude Juncker, who currently holds the rotating EU presidency, accused some nations of lacking the political will to reach a settlement.

If we remove the rebate, we have to remove the reasons for its existence

British PM Tony Blair

Diplomats and others, he said, "will tell you that Europe is not in crisis".

"It is in a deep crisis."

His comments were echoed by German Chancellor Gerhard Schroeder, who said: "We are in one of the worst political crises Europe has ever seen".

The Brussels summit also ended without any plan to save a proposed constitution rejected by French and Dutch voters in recent referendums.

'Distortion of expenditure'

Mr Chirac said Mr Blair tried to "safeguard his entire rebate, and that led other countries to overplay their hand".

"That is a bad result for Europe," he said.

Constitution woes

Summit diary

Mr Blair has claimed four or five other nations - among the 25 EU members - supported his decision to reject the deal.

Asked if France and Luxembourg had sought to isolate Britain in the row, Mr Blair replied: "If it was such an attempt, it failed."

There was fighting talk from Mr Blair, says our correspondent Jonny Dymond, and it attracted the undisguised bitterness and hostility of Britain's biggest partners in the EU.

Mr Blair said the British rebate was itself the result of a "distortion of expenditure across the EU" and therefore, "if we remove the rebate, we have to remove the reasons for its existence".

He went on to attack the Common Agricultural Policy (Cap), which decides EU farm subsidies, for diverting to agriculture funds that would be better deployed on science, technology and education.

The UK is set to take over the EU presidency at the start of next month.

Horns locked

Britain said it will veto any cut in the 4.4bn euro (£3bn) rebate unless farm subsidies are overhauled, a stance which puts it at loggerheads with France.

HAVE YOUR SAY

The EU does not exist only for the benefit of the UK

Niclas, Uppsala, Sweden

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French President Jacques Chirac refused to discuss any cut in farm subsidies and says the rebate should "under no circumstances be linked to a reform of farm expenditure".

The BBC's William Horsley in Brussels says the summit descended into a bitter feud about what Europe is for and who should decide its future.

Earlier, the leaders put the EU constitution on hold by abandoning a 2006 deadline for ratification, following the 'No' votes in the French and Dutch referendums on the issue.

The proposed constitution, which needs to be ratified by all 25 member states, is designed to define the future direction of the union and the way it is run.

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