Agreement clears way for enlargement

Borrowing a technique from the agriculture ministers, the European Union's leaders stayed up all night here to agree a budgetary deal for the next seven years. It was a roller-coaster session, producing gloomy reports and headlines anticipating a disastrous outcome for city editions printing at 3.30 a.m., but turned around by the time it finished at 5.50 a.m.

By this stage the overall budget for structural and cohesion funds had been marginally increased to cater for such diverse interests as Lisbon, the Highlands and Islands, Britain's budget rebate, pressure from Spain and Ireland for more resources to finance regional development and concessions to France on agriculture. As a result, headlines are expected to improve dramatically in reporting the summit's final outcome.

As the German Chancellor put it yesterday morning, he did not win the lotto and saw his country's net contributor status reduced less than he would have liked in the bargaining. But that is the cost of holding the chair and will presumably be outweighed by the political kudos of achieving an agreement. Mr Schroder is also pleased with the decisions to appoint Mr Romano Prodi as new Commission president and with the broad consensus across the 15 member-states on Kosovo.

Such a comprehensive agreement clears the way for enlarging the EU by some 12 to 15 members over the next decade- and-a-half. It will intensify the pace of accession negotiations with those states, the first group of which is now expected to join before the end of this budgetary period. The new budget scrupulously ringfences the money already provided for enlargement. This should generate goodwill from those states by underlining the commitment to their development. But it must be remembered that many of the budgetary adjustments agreed were undertaken precisely to avoid giving similar commitments to the newcomers.

Ireland's transitional status towards net contributor status is now fully acknowledged politically. As the Taoiseach put it at his final press conference yesterday morning: "Whoever is here in 2006 is going to find it very likely that they will be on the side I was fighting for the last two days - the net contributors. That's the way we are moving". Although Ireland is certainly seen as a model for development by central and eastern European states, notably concerning the role of foreign direct investment and export-led growth, they will have to develop with only one-tenth of the aid per capita that Ireland has enjoyed.

At each stage of its preparatory work and negotiations the Government had to make judgments about the long-term strategy to be followed. It comes out of these talks with the Common Agricultural Policy intact. This was a strategic choice, since it is the one common policy that will survive intact, irrespective of economic growth and development. Degressivity or other structural changes were avoided.

It will now be up to farmers to develop markets in response to this more certain framework, just as it will be up to the Government to develop a national plan and a promised rural development plan to supersede the reliance on transfers from Brussels during this transitional period. They will need to spend a lot more in the eastern part of the State, given the big squeeze on funding in this deal. The scale of the funding task facing them is illustrated by contrasting last week's ESRI report which speaks of a £47 billion investment required between now and 2006, of which the EU package (CAP excluded) is just £3 billion.

In another respect the metaphor of an agricultural negotiation seems apt to describe the mechanics and ethos of the Berlin European Council. The agricultural council is notable for its clubbish atmosphere, running this most supra-national policy as if it were a matter of domestic rather than foreign policy. To observe the manner in which this negotiation was conducted was to see something similar happening, despite the fact that only 1.27 per cent of the EU's aggregated gross national product is involved.

The degree of political solidarity and engagement is far above the level that might be suggested by this figure, and seems to be crossing the threshold between domestic and foreign affairs. This could be seen clearly in the decision to nominate Mr Prodi as the new Commission president and in the statements on Kosovo.

Mr Prodi commands universal support and admiration, which gives him a good head start but creates high expectations. The summit declaration on his appointment says the EU needs "as soon as possible, a strong Commission capable of taking action, while respecting the rule of openness and closeness to the citizens".

It "should give urgent priority to launching a programme of far-reaching modernisation and reform". The heads of state or government are to meet him on April 14th to discuss a programme outlining the way the new Commission will work.

As Ireland goes through this transition period it will be all the more important to maintain influence at the Commission by nominating politically experienced people for the job.

The statements on Kosovo signal a deeper EU involvement in foreign policy, security and defence affairs, and a greater level of agreement on them. They are a prelude to new arrangements to streamline procedures under the Treaty of Amsterdam, which come into effect in May, including the appointment of an individual to represent the EU interest. They have to be seen in the context of NATO's 50th anniversary next month in Washington, where it is to adopt a new strategic doctrine. Much interest will centre on the US effort to give it a mandate for Kosovo-type interventions, compared to the EU's likely preference for UN Security Council legitimation.