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Blair and Chirac face EU budget showdown

Reuters | June 14, 2005
By Andrew Gray

French President Jacques Chirac and British Prime Minister Tony Blair prepared for a showdown over the European Union budget on Tuesday with hopes fading for a deal on the 25-nation bloc's long-term finances.

Blair has signaled he is ready to compromise on Britain's multi-billion-euro annual EU rebate provided France also gives ground on the substantial farms subsidies it receives. Chirac has refused, saying the agriculture budget was settled in 2002.

The British leader began the day by meeting Luxembourg Prime Minister Jean-Claude Juncker and was scheduled to travel to Paris later for talks with Chirac.

Juncker, holder of the EU's rotating presidency, is trying to broker a budget deal.

The prospects seem dim. Blair stood his ground in talks in Berlin on Monday with German Chancellor Gerhard Schroeder, who has joined Chirac in pressing Britain to give up its rebate.

The leaders showed few signs of backing down. Schroeder demanded his European partners give up their "national egotism" to seal a deal and Blair responded sharply to the German leader's call for a "fair compromise."

"Of course everyone wants a deal that is fair," Blair said. "But we have to look at fairness in respect of the whole way Europe is financed."

Blair came under further pressure to give away some of the rebate won by Margaret Thatcher in 1984, when one of his closest political allies, EU Trade Commissioner Peter Mandelson, said it was wrong for the poor new member states from eastern Europe to be contributing to a cash refund for wealthy Britain.


Chirac faced pressure from some French politicians to compromise. Francois Bayrou, leader of the centrist UDF party and a frequent Chirac critic, said Paris was right to defend farms subsidies but had to give ground in other areas.

"We cannot enter into negotiations like this by simply demanding the others make a gesture," he told LCI television.

LCI commentator, Pierre-Luc Seguillon, said it was hard for France to demand Britain give up its rebate while insisting Europe retain farms subsidies which he said were outdated.

"It will be difficult for France to avoid paying the political and economic price at the European summit of its 'No' to the European constitution on May 29," Seguillon said.

Still reeling from French and Dutch rejections of the EU constitution in referendums, Europe faces the prospect of financial gridlock if it fails to reach a budget deal at a summit in Brussels on Thursday and Friday.

Swedish Prime Minister Goran Persson said on Tuesday the deadline for EU states to ratify the constitution should be extended from November 2006 after the French and Dutch votes and Sweden might delay its own parliamentary ratification, due in December, unless the summit produced clarity on the way forward.

A delay in securing a budget deal would put urgently needed public investment in the poorer new member states at risk. The EU budget is 106.3 billion euros ($130 billion) this year.

Franco-British squabbling over the British EU rebate and farm subsidies dominated budget talks among foreign ministers on Sunday night, leading some to lower expectations of an early solution and focus instead on limiting the damage.

The German and Italian foreign ministers seemed to suggest Europe could lock in agreement in budget areas where there was common ground and delay the tougher issues until a later date.

Britain takes over the rotating six-month EU presidency on July 1, but its partners do not see it as an honest broker on the rebate, making a budget deal improbable on Blair's watch.

Britain won its rebate when it was one of the poorer EU countries and got little back from Brussels in farm subsidies, which at the time made up 75 percent of the EU budget.

Britain is among the richest now, and farm payments are 43 percent of the budget, but it argues that even with the rebate, its net EU contribution is much greater than that of France.

Paris says future farm spending was settled at a summit in Brussels three years ago -- a view that Schroeder endorsed.


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