Even key British allies seeking a smaller EU budget have criticised Tony Blair's initiative, writes Jamie Smyth in Brussels
European foreign ministers meet today to discuss the British proposal for a new EU budget 2007-2013 amid rising tensions among member states and the European institutions.
The budget proposal will be strongly criticised by several east European states, which stand to lose €14 billion in funding under the proposal. It will also face criticism from some of the original 15 EU states, including Ireland, which believe the proposal is skewed towards meeting British rather than wider European interests.
British foreign secretary Jack Straw can expect a rough ride from proactive EU states such as France, Belgium and Luxembourg at a special conclave in Brussels. But even key British allies seeking a smaller EU budget, such as Swedish prime minister Goran Persson yesterday described the budget proposal as brazenly "pro-British".
A big hurdle facing the proposal and the chances of clinching a deal next week at the European Council is the British rebate. This financial instrument, agreed in 1984 to compensate Britain for its small farm sector, diverts funds from EU coffers back to London.
Because of EU enlargement last year it is set to increase despite Britain's proposal yesterday to pay an extra €8 billion into the budget, either by reducing its rebate or increasing its VAT contributions to the EU.
According to British calculations, the rebate will rise from €5.6 billion this year to an average €7 billion a year in 2007-2013 under its proposal. This is likely to prove unacceptable to states that want Britain to pay more into the EU.
But Tony Blair faces huge pressure at home from a Eurosceptic media and opposition that accuse him of selling out Britain's national interest following his pledge at failed budget talks in June not to touch the rebate without reform of the common agricultural policy (Cap). Progress on the rebate will be politically difficult.
The €14 billion proposed cut in funds for the 10 new member states could also prove a sticking point. Yet proposals to loosen the restrictions on how the 10 draw down and spend the cash may persuade them to accept a deal. They also face a conundrum because the absence of a budget deal would mean lengthy delays in funding.
The proposal to reduce the overall size of the budget to €846 billion from €871 billion, when compared to the previous proposal made under the Luxembourg presidency, has also raised the hackles of the European commission and parliament.
Commission president José Manuel Barroso initially dismissed the proposal as a "mini-budget". Yesterday he softened his line somewhat, but still questioned whether the EU could perform its duties and enlarge with the limited budget proposed. He also emphasised that EU leaders would have to meet the concerns of the parliament, which could veto a budget even if it is finally agreed by all 25 member states.
Mr Barroso, who has been a key ally of Mr Blair's reform agenda, targeted a €1 trillion-plus budget, or 1.24 per cent of EU gross national income. However, this was never likely due to stiff opposition from the so-called 1 per cent club of states, which includes Britain, Sweden, the Netherlands, Austria and Germany.
From an Irish perspective, the budget proposal contains some welcome measures, including €200 million for Northern Ireland between 2007-2013 under the peace programme initiative. But the Government will have concerns about elements of the proposal, particularly a €7 billion cut in rural development funds for the original 15 member states of the EU and a €2 billion cut in Cap receipts.
The latter arises because the proposal would not increase Cap funds to accommodate EU enlargement in 2007 for Romania and Bulgaria.