Britain, France Lock Horns Over Budget

British Prime Minister Tony Blair's visit with French President Jacques Chirac on Wednesday went off as widely expected -- amiable enough but with no breakthrough on the yawning differences between the two leaders over the 2007-2013 EU budget plan.

"The meeting I've just had with President Chirac was immensely amicable but obviously there's sharp disagreement," Blair told a news briefing after talks. "I think it is difficult to see these differences being bridged, but of course you know we continue to talk."

British rebate and French farm subsidies

The dispute centers on Britain's controversial 5.3 billion euros ($6.4 billion) EU rebate, forged by Margaret Thatcher's iron will two decades ago, that is under fire from other EU members sick of footing the bill. France, Germany, Spain and the Netherlands in particular want the rebate to be reconsidered, claiming that since it was introduced Britain has grown much richer and the EU much bigger.

Britain wants a reform of agricultural subsidies, agreed upon in 2002, which consumes more than 40 percent of the EU's budget and especially benefits French farmers. Blair wants Chirac to give ground on the topic before it agrees to submit its annual rebate from European coffers for renegotiation -- a demand that Chirac is unlikely to give in to for fear it could anger powerful French farmers at a time when his personal popularity at home has slipped to dismal levels.

Chirac has called for a "gesture of solidarity" from Britain to freeze or surrender its debate.

On Wednesday, Chirac's spokesman Jerome Bonnafont told Reuters that France wanted "a fair and reasonable agreement" in which everyone made a contribution. He made no reference to any French concessions. Bonnafont said Chirac believed it was "important we do not add financial difficulties to the current political crisis in Europe," sparked by the rejection of the EU constitution in France and the Netherlands.

EU treaty ratification tricky issue

Wednesday's meeting with Chirac marked the end of a two-day whirlwind diplomatic tour for Blair which also took him to Russia and Germany. The tour was meant to focus principally on the summit of the Group of Eight industrialized countries in Gleneagles next month. Britain is chairing the G8 this year and has made ending chronic poverty in Africa one of its top concerns for meetings, along with real progress on confronting climate change.

Britain's own decision to shelve plans for a planned referendum on the EU constitution next year in the wake of the two rejections in France and the Netherlands has not gone down well with other EU members who still want to push ahead with the ratification process.

In Germany, Chancellor Gerhard Schröder has emerged as a vocal champion of the embattled EU constitution, urging the bloc to press on with the ratification process despite London's decision to call off a planned referendum on it.

He has also taken the French side in the farm subsidies row, which Blair has said must also be put on the table in Brussels this week.

"Chancellor Schröder is clearly on the same lines as the French president as far as agricultural subsidies are concerned," government spokesman Bela Anda said Monday ahead of the meeting between Schröder and Blair.

A clear political direction

Britain's position on both the constitution and the budget and Blair's row with Chirac have left it looking increasingly isolated within the EU -- a situation similar to the time when Britain joined the US-led invasion in Iraq in 2003 in the face of fierce Franco-German opposition.

Experts are pessimistic about the prospect of a deal on either of the issues at a two-day EU summit that kicks off in Brussels on Thursday.

Luxembourg Prime Minister Jean-Claude Juncker, whose country currently holds the six-month rotating EU presidency, said he was fairly certain a deal wouldn't be brokered at the summit.

"I am pretty sure we won't get the financial perspectives through at this summit," Juncker told a European Parliament committee, hours before he was due to circulate a compromise proposal on the 2007-2013 budget to EU leaders. "There is agreement, more or less, on the total amount of funding. We differ as to payments to the budget, the structure of expenditure and who is a net contributor," Juncker said.

Tony Blair, who has rejected a long-term freeze on Britain's widely-criticized EU budget rebate, has linked the budget dispute to the constitutional and political crisis gripping the EU and called for a pause for reflection.

"If we want to reconnect people in Europe with the idea of the European Union, we've got to set a clear political direction," Blair said after Wednesday's meeting with Chirac.

"We've got to, even in the financing of Europe, in fact, in some respects particularly in the financing of Europe, reconnect the priorities that people have in Europe with the way that we spend the money in Europe," Blair said.

"If we were to set out some of that forward path and direction, then I think it would be a lot easier to persuade people why it's necessary also to have a new set of rules to govern Europe."