EU: A senior government source in Berlin has demanded that Britain compromise on its rebate to secure agreement in upcoming EU budget negotiations.
Chancellor Gerhard Schröder has said that Germany is "prepared to compromise" at the EU summit in two weeks' time, but yesterday's remarks suggest this readiness to compromise depends entirely on Britain.
"Without movement from the British the right atmosphere for an agreement would be lacking," said the senior source in Berlin yesterday. "It means that the British must show their willingness to compromise," said a government spokesman later. "It is not a demand to let the entire rebate fall, but between letting it fall and letting it stand as it is there are many possibilities."
Mr Schröder held two hours of talks with Luxembourg Prime Minister and EU president Jean-Claude Juncker on Thursday, during which they discussed a proposal to cap spending at 875 billion over the seven years of the budget.
The proposal, published yesterday, would limit EU budget contributions to 1.056 per cent of EU gross domestic product, higher than the 1 per cent sought by Germany, Sweden, France and other countries.
Mr Juncker and Mr Schröder also discussed offering a rebate to help heavy contributors like Germany, Sweden and the Netherlands lower their contributions. The rebate, financed by other member states, would begin in 2007 and continue on a "downward path" over the life of the budget, the source in Berlin said.
Luxembourg's proposals would fix Britain's rebate at €4.5 billion, but some 21 years after securing the original rebate, officials in London are defending it as staunchly as ever.
The rebate has saved the UK more than €74 billion since 1984 and is up for renewal next year. Leading EU officials have said that Britain is much better off than when the rebate was agreed, making it no longer justified. British Foreign Secretary Jack Straw has threatened to use the British veto to defend the rebate if necessary.
The senior government source in Berlin said yesterday that EU leaders could not allow the constitution crisis to be followed by a financial one.
Conceding on the rebate would be politically devastating for British Prime Minister Tony Blair, but other EU leaders are under pressure as well.
Dutch Finance Minister Gerrit Zalm rejected Luxembourg's proposal yesterday as inadequate. He is pushing for strict limitation of the new EU budget and a British concession on its rebate, using as leverage the Dutch rejection of the constitution due to resentment over the fact that the Dutch are by far the greatest per head contributors to the EU budget.