EU: The European Commission increased the political pressure yesterday on British prime minister Tony Blair to negotiate and agree a deal on the EU budget.
Commission president Jose Manuel Barroso warned of grave consequences for the EU if the current deadlock on the financial perspectives was not broken this year.
"No agreement would be very negative for all of us If we don't have an agreement by the end of December, our 2007 commitments are in danger," said Mr Barroso, who warned another budget failure could cause political instability within the EU.
In a letter to Mr Blair, he set out five proposals to break the deadlock on the budget. These included a new scheme to siphon off funds earmarked for farmers under the common agricultural policy (Cap) to boost rural development and a "shock absorber" fund to cushion the effect of globalisation on displaced workers.
He also floated a proposal for a mid-term review of the EU budget in 2009, but insisted Cap could not be reformed until 2013 or no budget deal would be agreed.
A third of the EU budget should be spent on measures to boost jobs and growth, Mr Barroso added.
EU budget negotiations held in June failed because of British demands to have the Cap reformed if it was to lose its EU budget rebate, which is a mechanism negotiated by London in the 1980s to get refunds from the EU due to its small farming sector.
But France, with its large farming community, is bitterly opposed to reforming Cap which makes up nearly half of the current annual €110 billion EU budget.
Mr Blair, who is the EU president, is now under enormous pressure to begin serious negotiations on the next budget period 2007-2013. He was planning to put off discussions of the budget at next week's EU leaders summit at Hampton Court. However, in a letter to EU leaders made public yesterday he admitted that he would brief leaders on the budget at the upcoming summit.
"I know the importance to all of you of achieving a budget deal I will update you further briefly at the meeting on how we are taking this forward through November."
Mr Blair also wrote that he thought the EU could secure a deal on the budget and he had found a "collective will" for a December deal following his consultations with member states.
President Barroso's five-point plan on the EU budget yesterday illustrates the difficulty that EU leaders will have on agreeing a compromise. Although the plan sets out that the Cap budget could not be cut until 2013, a proposal to redirect 1 per cent of it every year to rural development rather than farmers is likely to irk Paris and the farming lobby.
Last night IFA president John Dillon described Mr Barroso's proposal as "totally unacceptable" to Ireland and a serious "breach of faith" with farmers.