Britain and France remained in disagreement over the fate of the so-called British rebate, an annual return payment from the EU budget, worth nearly 5 billion euros ($6 billion) a year. All other EU member states want it scrapped, but Britain insists this can only be done if the EU’s large farm budget is slashed.
France -- the largest contributor to the British rebate, and also the largest beneficiary of the EU farm budget -- refused today to authorize cuts in farm subsidies.
Britain won its rebate in 1984, at a time it was relatively poor, and received little money from the EU farm budget to offset its contribution.
Britain argues that its rebate is no more anachronistic than the EU budget, 40 percent of which is allocated to farm expenditure. London wants a large part of those funds to be reassigned to support research and development, as well as economic reforms in the EU.
However, heeding calls from Germany to bring down overall costs, the EU’s Luxembourg presidency has cut research funds and left agricultural spending untouched.
Swedish Prime Minister Goeran Persson said the debate amounted to more than just a row between Britain and France.
"We are quite many who are disappointed about the structure in the budget, and I must say I am a little bit surprised when I see the description of this summit as a fight between France and the U.K.," said Persson. "It is a media invention. There is much more in this discussion than that."
Danish Prime Minister Anders Fogh Rasmussen also demanded more money to be invested in making the EU economy more competitive.
"I think the Luxembourg [EU] presidency has presented a very good basis for the final negotiations, but I would like more investment in the future [into research, education, and the like]," Rasmussen said.
Sweden and the Netherlands, the two biggest per capita net contributors to the EU budget, also insist their costs must be reduced. The Netherlands currently pays 120 euros more per inhabitant into the EU budget than it gets back. The equivalent figure for Sweden is 106 euros, and Germany -- the biggest contributor in absolute terms -- spends 93 euros per citizen.
Diplomats say the Netherlands this morning flatly rejected the latest compromise, saying it did not offer enough savings.
Persson also appeared to prefer postponing a budget decision to what Sweden would see as an unsatisfactory deal:
"We all hope that there will be a [budget] deal, but it is better to take a year more and continue to negotiate than go for one more bad compromise," Persson said.
Meanwhile, some of the less affluent older EU member states -- Portugal and Greece among them -- were fighting to maximize their receipts from the 2007-13 budget in the face of stiff competition from the EU’s 10 new and relatively poorer member states.
Officials said the EU's Luxembourg presidency would take stock of the talks in the early afternoon and was prepared to end the summit early if there was no realistic hope of a deal.