EU Leaders: Constitution to be Put on Ice

Going into the crisis meeting in Brussels, Germany still clung to hope for the 25-member bloc's planned charter, already ratified by its parliament. "The constitutional treaty will be part of the EU's future. To say 'the constitution is dead' also discredits the German 'yes' on the constitution," said German Chancellor Gerhard Schröder.

But, at a pre-summit meeting outside Brussels, "a vast majority" of conservative leaders favored suspending ratification of the charter, said European People's Party parliamentary chief Hans-Gert Pöttering.

Luxembourg Prime Minister Jean-Claude Juncker, who holds the EU's presidency, and EU commision chief Jose Barroso both "proposed suspending the process," said Pöttering.

Dutch Europe Minister Atzo Nicolai ruled out a new referendum on the spurned constitution, saying: "It is dead in the Netherlands, this treaty."

The treaty must be ratified by every EU member to become effective, prompting Swedish Prime Minister Göran Persson to question the use of carrying on as scheduled with a vote in his own country.

"I want a clear message from France and the Netherlands about how they will deal with their 'no' votes. (If) there is no clear message, I think we will also have a delay," Persson said.

Danish Prime Minister Anders Fogh Rasmussen echoed the comments. "We can't put the treaty to a vote in Denmark if the text will afterwards be changed. It doesn't make sense. It is a clear perequisite for continuing the process that we get this clarification," he said.

Quo vadis, Europa?

According to diplomats in Brussels, all 25 member states were in agreement that the ratification process should be suspended until at least next year while they discuss the future direction of the European project.

French President Jacques Chirac also said he had doubts about future expansion plans of the bloc. He called for a special summit to discuss the future direction of the union.

"Can the union in this new situation really expand without having the proper institutions for it?" he asked the fellow leaders in a prepared text. "I think we need to discuss these important questions together."

Budget deadlock

A deal on the EU's 2007-2013 budget -- blocked partly by Britain's refusal to surrender a hard-won rebate -- would only be possible if all 25 members were ready to compromise, said Schröder, who was gloomy about the prospects for an agreement.

"I don't think there will be a deal on the budget. The differences are too big," he said. "I'm not optimistic about a deal."

At the end of the first day of the meeting, his prediction looked correct, since a budget deal seemed far away. British Prime Minister Tony Blair has thus far refused to release his grip on the UK rebate, despite a last-minute offer by the EU presidency.

Luxembourg's Juncker suggested freezing, not cutting the British rebate, which was worth 5.3 billion euros last year and was projected to average 7.1 billion euros annually between 2007 and 2013. Any future reductions in the rebate would be tied to a reduction in EU agricultural aid after 2013.

But no country gave ground.

Farm subsidies vs. rebate

Britain is refusing to accept a change to its budget rebate without a rethink of EU farm subsidies that gobble up 40 percent of the entire EU budget. The rebate, sancrosanct to Britons across the political spectrum, has been in place since 1984 to compensate for the relatively small amount that Britain reaps from the Common Agricultural Policy (CAP).

Foreign Secretary Jack Straw set out Britain's stance as EU leaders voiced little hope of a breakthrough on the budget talks.

"The proposals from the presidency are not acceptable to us," Straw said. "That's one of the reasons why there's going to be difficulty" during the conclave, he told reporters.

Blair's spokesman said the cabinet backed his refusal to give way on the rebate, secured by the iron-willed former British leader, Margaret Thatcher, in 1984 to compensate for the relatively small amount London received in EU farm aid.

The rest of Europe stepped up the pressure on Blair, including Germany.

"There is absolutely no justification any longer for the British rebate," the German leader said. "Britain is the sixth biggest per capita beneficiary of the EU budget but ranks far below that as a contributor."

Blair, who takes over the EU presidency on July 1, is pushing for a "fundamental debate" about the bloc's future, including CAP, which gives generous subsidies to farmers, especially those in France.

Upping the ante, a British spokesman said it was not essential for the summit to agree the 2007- 2013 spending plans -- leaving open the prospect of it being delayed until after the upcoming British EU presidency.