UK will cut rebate only if France cuts subsidies

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OUTLOOK

EU leaders to mull concessions on UK rebate in bid for budget deal

06.16.2005, 02:09 AM

BRUSSELS (AFX) - EU leaders will today consider the Luxembourg presidency's concessions to the UK on its prized rebate on European budget contributions in a bid to secure a deal on the bloc's future funding

Leaders were pessimistic yesterday about the chances of an agreement on the EU budget for 2007-13 during their two-day summit, with British prime minister Tony Blair and French president Jacques Chirac expected to clash over the rebate and farm subsidies.

Luxembourg prime minister Jean-Claude Juncker said he is 'pretty sure' leaders will not strike a deal at the summit, even though he will today present a compromise proposal that is 'just about acceptable' to all member states.

In the proposal unveiled last night, the presidency said the UK's rebate would be scaled down from 2013, after a freeze from 2007 at its average level before 10 new member states joined in 2004.

This compares with an earlier proposal to freeze the rebate in 2007 and gradually reduce it from 2008.

But the UK has refused to agree to cuts to its rebate, famously negotiated two decades ago by then prime minister Margaret Thatcher, unless France accepts reductions in farm subsidies.

The presidency last night proposed linking any reduction in the rebate after 2013 to possible reforms of EU farm aid.

'Any change to the level of the UK budgetary correction after 2013 will depend in particular on the evolution of market-related expenditure and direct payments in agriculture post 2013,' the proposal said.

The rebate, amounting to 4.6 bln eur a year between 1997 and 2003, is a key obstacle to agreement on the EU budget.

The presidency also made concessions to the EU's net contributors beside the UK -- Germany, the Netherlands and Sweden -- by scaling back their commitments.

Juncker is aiming for an agreement at the summit in the belief that the UK would make little progress during its presidency starting on July 1.

Despite pessimistic comments from leaders, European Commission president Jose Manuel Barroso was upbeat yesterday about the chances of a budget deal.

'I remain confident. I believe an agreement is within our grasp,' he told reporters.

Barroso warned however: 'Everybody has got to make an effort. Everybody is going to have to budge. Everyone is going to have to compromise.'

He called on the UK and France to 'make an effort' to secure a deal.

On the other key focus of the summit, the EU constitution, leaders are likely to agree to postpone the October 2006 deadline for completing the ratification process following the French and Dutch 'no' votes.

'That's the best way in which we are likely to save the constitution,' Barroso said.

'We don't want to just throw in the towel, nor do we want to act as if nothing has happened,' he said.

Barroso said he is advocating a 'pause for reflection' in the ratification process because of the fallout from the French and Dutch referendums.

If other countries press on with plans to hold polls on the constitution, 'we'd run the risk of other 'no' votes and obviously that would be very negative for the image of Europe', he said

Edited June 16, 2005 by Blackleaf

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The UK is drawing up plans to reduce France's CAP subisidies to give to the poorer EU states more in need of them when it takes over the EU Presidency in July.

Chirac, who arrogantly called for Britain to lose its annual rebate from the EU but refuses to reduce the amount of CAP subsidies that France receives, is now being punished by Blair, and will almost certainly see France's CAP subsidies reduced.

EU agenda comes unstuck

By Stephen Mulvey

BBC News

EU flag

EU enlargement was an issue in the French and Dutch "no" votes

A summit in Brussels on Thursday and Friday provides European leaders with a chance to show that the EU still works - but all the signs are that they will fail.

Reports suggest there will be no initiative to rescue the constitution, no agreement on the budget for 2007-13 and an unusual silence on what many consider the EU's most successful policy - enlargement.

"Our meeting comes at a difficult moment in the construction of Europe," says the holder of the EU presidency, Luxembourg's Prime Minister Jean-Claude Juncker, in a grimly-worded invitation to summit participants.

"The citizens of Europe will be paying particular attention to our discussions and will be expecting answers and action from us. I am counting on your support and co-operation in showing that the European Union is acting in their interest."

But few answers or actions are currently visible on the horizon. On the contrary, it may be hard to prevent an impression that the EU is unravelling.

The constitution

Immediately after France and the Netherlands voted against the constitution, a number of EU leaders - including Mr Juncker, the President of the Commission Jose-Manuel Barroso, French President Jacques Chirac and German Chancellor Gerhard Schroeder - cried that ratification must continue against public support.

Editor : Now they agree with Tony Blair for pausing and reflection.

The Brussels summit, however, will provide no such sense of forward movement.

Member states will be left to ratify the treaty or not, as they wish.

At the moment, I have the feeling that the ground is shaking beneath our feet

EU Vice-President Guenter Verheugen

Denmark has already indicated that it may, like the UK, call off its planned September referendum, while Poland and Sweden have said they will delay ratification unless the summit issues a clear call to action.

Luxembourg is sticking to its plan for a referendum on 10 July, but polls show the "No" camp rapidly gaining ground there. This is bad news for Mr Juncker, who has threatened to resign if it wins.

The word from a meeting of foreign ministers in Luxembourg this week was that the ratification deadline of 1 November 2006 would not be rigidly enforced.

And European Commission Vice-President Guenter Verheugen told Germany's Sueddeutsche Zeitung newspaper that a whole series of countries needed time to restore public trust in the EU.

"We have to see leadership," he added. "At the moment, I have the feeling that the ground is shaking beneath our feet."

The 2007-13 budget

UK Prime Minister Tony Blair

Blair has spurned a proposed plan to freeze Britain's £3bn rebate. This is one area where the summit could just pull a rabbit out of the hat, but the prospects are not looking good. The most likely outcome is that leaders will rigidly defend national interests, at the expense of any deal.

Luxembourg believes agreement to freeze the UK budget rebate at its current level could be the key to success. But UK Prime Minister Tony Blair has ruled this out, unless there is a big cut in farm subsidies.

French President Jacques Chirac, in turn, is not prepared to let down France's farmers - major recipients of these funds - all the more so, given that a deal was struck in 2002 to preserve agricultural spending at its current level until 2013.

Luxembourg has proposed that farm aid should be paid to Romania and Bulgaria, when they join the EU in 2007 or 2008, from this agreed pot of money, rather than from a separate fund. It's not clear whether France will agree, or whether that would unlock a deal.

But if the summit fails to produce a compromise, the budget conflict could intensify.

The UK, which takes over the rotating presidency from Luxembourg, is reported to be drawing up plans for a major campaign to cut farm subsidies, and to focus regional aid entirely on the new member states, plus Greece and Portugal.

So few observers expect a budget deal before the end of the year - and this could disrupt the funding of EU projects due to begin in 2007.

Enlargement

The communique issued at the end of this summit will make no more than a passing reference to the EU's further expansion.

This is a break with tradition, and a recognition that some states have deep misgivings about enlargement, especially now that the constitution is on indefinite hold.

We need to give our citizens time to breathe - to my mind we must reduce the speed of enlargement

EU External Affairs commissioner, Benita Ferrero-Waldner

French Foreign Minister Philippe Douste-Blazy said on Monday that it would be "difficult" to add more member states in the absence of the constitution, which would have set rules designed to make it easier to run a larger union.

He also pointed to the opposition to the enlargement process - and particularly to Turkish membership - expressed by many French voters in the 29 May referendum.

EU external affairs commissioner, Benita Ferrero-Waldner, called for time to digest last year's expansion before admitting others. "We need to give our citizens time to breathe," she said. "To my mind we must reduce the speed of enlargement."

Many experts now believe that Bulgaria and Romania, which signed an accession treaty earlier this year and hope to join in 2007, will be kept waiting until 2008.

Will the new democracy wave on Europe's Eastern border be deterred by these negative signals? Nothing could be more damaging

Letter from European think-tanks to the European Council

But the decision to keep the summit conclusions vague was spurred by disagreements over Turkey.

At a foreign ministers' meeting in Luxembourg on Monday, the UK said the final communique should specify that accession talks with Turkey would start in October.

Other countries, including Austria and Cyprus, argued for a toughening of the conditions for Turkish membership.

The result was a compromise designed to keep the peace, and delay the arguments to another day.

Other countries which could be left feeling uneasy are Croatia, already officially a candidate, and the other states of the Western Balkans, who have been promised membership if they meet the criteria.

Some experts fear that any cooling on the EU's part towards enlargement could cause these countries, and others, to halt the process of reform that the prospect of eventual membership stimulates.

"Will the new democracy wave on Europe's Eastern border be deterred by these negative signals?" wrote a group of European think-tank leaders to the European Council.

"Nothing could be more damaging to the countries involved and to Europe alike."