British EU Budget Proposal Shot Down

Britain on Monday put forth an EU budget proposal that signalled willingness to compromise on its controversial rebate if the organization's newest members would agree to less development aid.

The 846.8 billion euro ($998 billion) spending blueprint outlined by Foreign Minister Jack Straw, whose country currently holds the rotating EU presidency, was 24.2 billion euros less than the budget proposed by previous president Luxembourg. The U.K. suggested cutting aid to the EU's ten new members in eastern and southern Europe by 14 billion euros over seven years and stood firm on its demand that the EU's generous agricultural subsidy system be revamped.

Though not willing to completely eliminate the EU budget rebate it negotiated it for itself when it was a poor nation in 1984, Britain offered either to pay more into the budget or to get back less, without giving figures.

"These proposals ensure that there can be no fundamental change in the rebate without fundamental reform of the common agricultural policy," Straw said.

EU Commission President Jose Manuel Barroso shot down the British proposal later in the day, calling it "simply not realistic". Barroso said it was unfair to the new, and substantially poorer, member states in eastern Europe.

"The proposal needs to become fairer for the new member states, " he said.

Budget talks failed in June

The EU budget for 2007 to 2013 ought to have been finalized at a summit in June, but the meeting broke up after a bitter dispute between Britain and France. London had refused to surrender its rebate while Paris opposed the British plan to reform the EU's farm subsidy system, of which it is the major beneficiary.

Blair had tried to force France to accept fundamental reforms to the Common Agricultural Policy (CAP) -- which takes up 42 percent of EU spending -- in return for a renegotiation of the rebate. France reaps the most from EU farm subsidies while Britain enjoys an EU rebate - amounting to 5.3 billion euros in 2004 - to compensate for the little it draws from the CAP.

Outlook for compromise grim

Leaders hope to find a way out of this dead-end situation at an EU summit planned Dec 15 to the 16th in Brussels, but those interviewed sounded less than hopeful.

Britain's EU minister, Douglas Alexander, said he saw no way to bridge the gap between the EU's net givers and net receivers. Dutch Finance Minister Gerrit Zalm said he wasn't sure the EU would reach a compromise on the budget at all this year.

German Finance Minister Peer Steinbrück is demanding a reduction in the fees paid by wealthier nations like Germany, the Netherlands and Sweden.

Later this week, Blair plans to hold talks with no fewer than eight fellow EU leaders, in an effort to break the deadlock. In meetings on Thursday and Friday, Blair will meet with prime ministers of Portugal, Finland, Slovenia, Sweden, the Netherlands, Ireland, Greece and Spain.

Chirac and Blair will meet

A spokesman for Blair did not rule out discussions with other EU leaders, notably French President Jacques Chirac, in the run-up to the Dec. 15-16 Brussels summit.

If the budget it not ratified by the end of Britain's presidency term in December, the job will fall to Austria, which takes over the rotating presidency on Jan. 1.

Blair's spokesman said: "We are not in a position where we can force people to make an agreement and that remains the basic position."