UK hangs tough on farm funds in EU budget endgame

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UK hangs tough on farm funds in EU budget endgame

Fri Jun 17, 2005 03:56 PM ET

By Sophie Louet and Katherine Baldwin

BRUSSELS (Reuters) - Britain spurned concessions on its rebate from European Union coffers on Friday and dug in its heels for a review of farm subsidies as EU leaders wrangled over a budget deal to save the 25-nation bloc from paralysis.

French President Jacques Chirac made known as a two-day summit entered its final hours that he would accept a freeze on London's cherished annual refund rather than the outright cut he sought if it helped clinch an accord on the 2007-2013 budget.

"A freeze is not enough, but if it is a compromise, like all compromises, we'll have to accept that it doesn't make everyone happy," an aide to Chirac told reporters.

But a British official swiftly belittled the move, saying London remained opposed to pegging the rebate originally won by Margaret Thatcher in 1984.

"Graciously accepting an offer we rejected three days ago doesn't do it for us," a British official said. "We don't think it's much of a concession. It would mean us losing between 25 and 30 billion euros (over seven years)."

Failure to agree on a long-term budget could add financial gridlock to a political crisis unleashed by French and Dutch "No" votes to the EU's new constitution, which was drafted to enable the enlarged bloc to take decisions more efficiently.

EU president Luxembourg prepared a last-ditch compromise to put to the 25 national leaders, who would decide whether it was worth haggling into the night in the quest for a deal.

Diplomats said it included an offer to cap Britain's rebate at 5.5 billion euros ($6.68 billion) a year, higher than the 4.6 billion euros proposed previously.

BRITAIN REJECTS

But British Prime Minister Tony Blair's spokesman immediately rejected that, saying any change must be linked to a reform of EU farm subsidies, from which France benefits most.

"It's clear that what the presidency is proposing doesn't clearly establish that link between any change to the rebate and reform of the budget, and the CAP (Common Agricultural Policy) in particular," the spokesman said. He said the proposal by Luxembourg Prime Minister and EU president Jean-Claude Juncker suggested a "comprehensive reflection on the budget" but appeared to ring-fence a 2002 agreement that preserved farm spending until 2013.

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EU crisis as Blair blocks rebate cut

By Toby Helm and David Rennie in Brussels

(Filed: 18/06/2005)

The EU faced further crisis last night as Tony Blair formally blocked a deal that would have substantially cut Britain's £3.2 billion annual budget rebate.

Senior British officials suspected that a trap had been set for the Prime Minister that would have preserved France's farm subsidies until 2013 while offering no prospect of fundamental reform of EU finances until then.

Having kicked the problem of the constitution into the long grass, the summit was trying to settle a new seven-year budget from 2007 to 2013. Mr Blair said he would give ground on the rebate but only in return for changes to the bloated farm subsidy regime.

The British No followed a day of manoeuvring during which states led by France had tried to corner Mr Blair into accepting annual cuts to the rebate or force him to wield a veto.

Britain strove to avoid accusations that it had wrecked what was already a crisis summit. The Prime Minister's official spokesman said the summit chairman, Jean-Claude Juncker, the prime minister of Luxembourg, had handed Mr Blair a revised offer in a private meeting but that it failed to establish the clear link Britain demanded between reforming the rebate and farm aid.

He said the Government believed that other nations, including Spain, Italy and Holland, had serious reservations about the compromise. France blamed Britain, but it was clear other nations were not happy either.

In addition, the spokesman said that Britain had been offered a unique payment mechanism on top of the existing budget and rebate system. "There was a request for additional money from the United Kingdom that is unacceptable to us," he said.

The spokesman said the language in the Luxembourg compromise was "worryingly ambiguous" and put French interests above British ones.

In a clear reference to President Jacques Chirac, of France, who had led resistance to the reopening of a 2002 agreement on farm subsidies, he said the wording could have been used by France to block any change. Britain would lose rebate and France would remain as it currently stands which is simply not acceptable.

Late last night Mr Juncker was tabling new proposals to try to bridge the divide. But British officials said the gulf was too wide.