EUROPEAN UNION BUDGET: Blair's Concessions on Budget Fail to Win over New EU Members

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Tony Blair's proposals to end the deadlock over the EU budget provoked strong opposition from eastern European nations even though he offered to cut Britain's rebate by about a fifth.

Under fire at home for his pledge to offer concessions over the rebate without concrete reforms on farm spending, Mr Blair faced criticism from leaders in central and eastern Europe at talks with them in Budapest yesterday. However, there was some optimism that the British proposals could lead to a breakthrough at a EU summit in Brussels in less than two weeks' time.

Under the plans the UK's annual rebate, worth around EUR5bn (pounds 3.3bn) a year, would be cut and Britain's net contributions to EU coffers would be similar to that of France and Italy. The rebate would be applied to all spending inside the old 15 members of the EU, all agriculture spending in the new 10 nations and to a proportion of the rest of the expenditure there.

Mr Blair himself increased the pressure on the 10 new members of the EU to accept a budget deal which will mean a 10 per cent reduction in the amount of money they are allocated in EU subsidies.

After talks with leaders of Hungary, Poland, the Czech Republic and Slovakia, Mr Blair warned that there might be no budget deal before 2007, if EU leaders do not reach agreement at their Brussels summit on 15-16 December.

'If there is no agreement now, I think it's unlikely we will get an agreement under the next two presidencies,' he said. He conceded that it would be 'difficult' to secure a deal this month.

That sentiment was echoed by the Hungarian Prime Minister, Ferenc Gyurscany, who said: 'Today we are far from an agreement. We should not support any decrease in the cohesion funds. The price cannot be paid only by the new countries.'

But the Polish Prime Minister Kazimierz Marcinkiewicz, whose country stood to lose some EUR6bn under the British plan and who said Poland would not accept 'a bad budget', sounded cautiously optimistic. He said: 'We needed this conversation [with Mr Blair. In my view we are nearing a proposal which is not yet ideal but much better than [Britain's] informal proposal.' Britain argues that a proportion of the planned subsidies for the east will never be spent under EU rules and it may sweeten the pill by making a smaller pot of cash more easy to spend. Though a number of countries now accept the logic, the idea is extremely difficult to sell in eastern Europe. …