British Prime Minister Tony Blair warned today that a deal on the European Union's long-term budget hung in the balance as pressure mounted on him to surrender more of Britain's cherished rebate.
Hours before the two-day summit of the bloc's 25 member states began, France and Poland urged Britain to make bigger sacrifices to help fund the development of the European Union's 10 new members from the poorer east.
Failure to agree on the 2007-13 budget could undermine the EU further after a year of setbacks, marked by the rejection of the bloc's first constitution by French and Dutch voters.
It could also isolate Britain and delay urgently awaited investment in development projects in eastern Europe.
EU leaders would also be forced to haggle over the bloc's budget for each year, unless an improbable compromise emerged in 2006. "It's going to be very tough and very difficult. It is just as well to be frank about that right from the outset. It hangs very much in the balance," Mr Blair, whose country holds the EU's revolving presidency, said as he arrived for the summit.
"We are going to do our best to reach agreement," he told reporters, adding that it was important that the EU gave the new member states an opportunity to strengthen their economies. In a joint letter, Paris and Warsaw said the ex-communist east European newcomers must not be victims of a tight spending cap proposed by Blair to satisfy wealthy nations who want the enlarged bloc to rein in its finances.
"The UK has been a champion of enlargement. We trust it will also be willing to cover the costs it presents," their foreign ministers said in a letter published in the Financial Times.
A spokesman for President Jacques Chirac said he conveyed that message to Blair in brief face-to-face talks before the summit, insisting the rebate must be permanently changed so it did not apply to enlargement costs except for agriculture.
Budget negotiations broke down in acrimony last June, when Britain rejected any cut in its rebate unless France agreed to a fundamental reform of the EU's lavish farm subsidies, which take 43 percent of the budget and benefit French farmers most.
Diplomats said other knotty issues of the summit - from whether Macedonia should be granted candidate status, to a deal on extending lower tax rates across the EU services sector - had been put on ice to allow more time for the budget talks.