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EU: Summit's Collapse Over Budget Hints At 'Deep Crisis'

Leaders at this week's EU summit The EU has lurched deeper into crisis after member states failed to approve a new long-term budget at their Brussels summit. France blamed Britain for the breakdown, as London refused to accept any reduction in its annual rebate. But the Netherlands and Sweden also blocked a deal on the 2007-13 budget, seeking cuts to their high contributions. The collapse was preceded by an extraordinary offer by the 10 new member states to give up some of their subsidies to sway Britain and the other objectors.

Brussels, 18 June 2005 (RFE/RL) -- Luxembourg Prime Minister Jean-Claude Juncker, whose country holds the rotating EU Presidency, was visibly embittered as he announced early today that the talks had failed.

"People [heads of some of the EU member states] will tell you next that Europe is not in a crisis. It is in a deep crisis," Juncker said.

Leaders were quick to point the finger of blame. France said it was Britain's fault, for refusing to accept any cuts to its rebate. Britain originally won the rebate in 1984 when it was a relatively poor member state that got little in the way of EU farm subsidies. Now it's among the richest, and many other member states say the rebate -- worth more than 5 billion euros last year -- should be scaled back or scrapped. French President Jacques Chirac said British Prime Minister Tony Blair had torpedoed the talks.

"He [Blair] wanted to retain his rebate, in its entirety, and this led a few other countries to encourage speculative attitudes, attitudes of strictly national interest to the detriment of the European interest," Chirac said.

But Britain says it will only accept cuts to the rebate if the EU overhauls its costly agricultural policy. That is apparently unacceptable to France, the main beneficiary of EU farm subsidies.

Blair also said Britain was not alone in rejecting a final Luxembourg presidency compromise. Other countries opposed it too -- including Sweden and the Netherlands, which wanted their high per capita budget contributions cut.

"I gather there have already been people saying this was all because the U.K. was unable to reach agreement," Blair said. "There were actually five countries round the table who could not reach agreement and, indeed, several others who expressed their unhappiness at what was being proposed."

In a bizarre twist, the 10 new EU member states made a last-gasp effort to save the talks when they offered to forgo some of the funds due to them to pay for the demands made by Britain and others.

Juncker told journalists he was "ashamed" as he heard the new member states "each poorer than the other" offer to give up some of their demands in the interest of reaching an agreement.

Juncker conceded, however, that the disagreement was about more than simple numbers.

"During the budgetary debate, there were two conceptions of Europe, which clashed and which always clash," Juncker said. "There are those, who without saying so, want the common market and nothing but a common market, a free trade zone -- and there are those who want a politically integrated Europe."

Britain -- together with Sweden, the Netherlands, and a few others -- argued that it wants the EU to engage in more forward-looking spending. He was quoted as saying during one of the meetings that it was "absurd" that the EU spends 10 times more on agriculture than science and research and education.

Britain and its allies said the draft budget allocated far too little money on "future-oriented" fields such as research and development, which are necessary help the EU boost its competitiveness. Economic growth in the EU has flagged since the early 1990s and unemployment levels in France and Germany are reaching levels unseen since World War II.

The four countries received lukewarm support from most new member states, as well as Italy, Portugal, and others. Most, however also argued that the value of solidarity exemplified by the EU's fund-hungry Common Agricultural Policy and regional development subsidies was too important to sacrifice.