EU Finance Ministers yesterday ended the phoney war over Agenda 2000 to get down to real negotiations for the first time on the EU's next budget.

On the fringes of the meeting there were also the beginnings of the emergence of a consensus on relations between ministers and the European Central Bank, the source of some friction recently over political fears of likely excessive caution by the bank on interest rate cuts.

While the euro-11 ministers reiterated their commitment to the bank's independence and to the disciplines of the Stability Pact, the French delegation spoke of an implicit compact between the bank and governments reflecting their willingness to maintain tight fiscal policies in return for some monetary relaxation in the interests of growth.

The German Finance Minister, Mr Oskar Lafontaine, spoke of the need for the bank to contribute to a growth-orientated policy mix that combined fiscal, economic, and monetary strategies.

In the budget debate there was some comfort for Ireland, with the unequivocal declaration by Mr Strauss-Kahn, that partial renationalisation of CAP payments was completely ruled out.

The statement was "very welcome", the Minister for Finance, Mr McCreevy said, reflecting the Irish view that re-nationalisation would represent the worst possible outcome of the row between net contributors and recipients over sharing the burden of EU expenditure.

But the German Finance Minister, Mr Oskar Lafontaine, although stressing that his new government was more flexible than the last, threw his weight behind proposals from the Austrian Presidency for a freeze on real EU spending.

Ireland supports the Commission's original spending plans and joined other Cohesion countries in warning that the Union would not be able to meet its political commitments if the budget is frozen.

But diplomats say that the indications are that the resolution of the dispute over "unfair" member state contributions to the budget is now likely to be found in controlling expenditure, a prospect that Dublin does not relish any more than the reform of the payments system Ministers meeting as the euro-11, ahead of Ecofin, failed to break the deadlock on who will represent the single currency at the multinational financial institutions like the IMF and G7.