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http://news.ft.com/cms/s/51594d14-df57-11d9-84f8-00000e2511c8.html)
EU crisis as Britain rejects deal on budget
By George Parker, James Blitz and Daniel Dombey in Brussels
Published: June 17 2005 18:57 | Last updated: June 18 2005 00:47
The European Union was plunged into political crisis on Friday night after Britain led the way in blocking a proposed deal on the new seven-year budget.
Tony Blair, the UK prime minister, was one of a minority of leaders who refused to accept a compromise package, as the Brussels summit collapsed in acrimony shortly before midnight. The failure of the talks means the transfer of billions of euros of aid to former communist countries in eastern Europe, due to start on January 1 2007, may be delayed.
The political ramifications of the breakdown, coming after French and Dutch voters rejected the EU constitution, could be severe.
Friday night recriminations flew about who was responsible for the failure, with Mr Blair taking much of the blame. His willingness to strike a deal on the €4.6bn ($5.6bn) British budget rebate was seen by the EU's Luxembourg presidency as the key to a deal. In rejecting an agreement, Mr Blair was taking a gamble which puts at risk his credibility as a European leader.
Other countries also rejected the final proposal. The Netherlands and Sweden insisted they were paying too much, while Finland and Spain registered their opposition once it became clear there would be no agreement.
The failure of the budget talks could cast a shadow over Mr Blair's forthcoming tenure of the EU presidency and his ability to lead Europe out of its political gloom.
Throughout most of Friday Mr Blair faced near-isolation after he rejected a seven-year EU financial package worth about €870bn. He refused to accept a Luxembourg proposal to fix the annual British budget rebate at about €5.5bn roughly its current level for the 2007-13 period.
“What is being proposed would guarantee change in our rebate without any guaranteed change to the EU budget,” said Mr Blair's spokesman.
Britain wanted to trade the rebate for changes to the EU's farm subsidy regime, of which France is the main beneficiary.
The British rejection of the deal was a political gift to Jacques Chirac, the French president, since it distracted attention from his country's No vote to the constitution and allowed him to assume the moral high ground.
Mr Chirac accused Mr Blair of a lack of solidarity with Britain's allies in eastern Europe, saying it was “indispensable that the United Kingdom in future takes its full part in the financing of the enlarged Europe”.
The 10 new European Union member states offered to accept less money in a last-ditch attempt to rescue a deal late Friday night, but the gesture failed to break the deadlock.
With the EU constitution on hold indefinitely and the budget row unresolved, José Manuel Barroso, European Commission president, has warned that Europe could slide into “permanent crisis and paralysis”.
Britain is keen to get the European Union to approve a wide range of initiatives over the next six months including the start of talks over Turkey's entry into the EU and passage of the services directive.
Having stood up so boldly for Britain's national interest on Friday night, the prime minister may now find it harder to present himself as a conciliator who can persuade member states to make compromises.
British government officials insisted that any fallout from last night's veto could be contained.
They argued that two other countries Sweden and the Netherlands had significant problems with the EU budget deal being proposed by Luxembourg. British officials argued that objections from both those countries were in line with the UK's belief that the EU budget demands a radical overhaul, in particular to reduce the scope given to agricultural subsidies. “We believe we are not isolated and there are other countries with us in the room,” said the prime minister's official spokesman. Mr Blair believes that his objection to a budget deal was rooted in more than a mere defence of the British rebate.
He insisted that the UK's rebate could be negotiated away only as part of a deal to reform the EU budget and the Common Agricultural Policy and that this position was in line with his commitment to European economic reform.
