The Netherlands rejected a new compromise proposal to settle a Dutch-German row over the European Union's budget rules today.
The Dutch stand made for an ominous start to a meeting in Luxembourg of EU foreign ministers who were due to tackle minor differences, clearing the way for their leaders to resolve the most contentious questions at a Brussels summit on Thursday and Friday.
The first constitutional treaty for the bloc, in preparation since early 2002, is designed to make the EU run more smoothly following its enlargement to 25 members from 15 last month.
EU president Ireland sought yesterday to overcome key Dutch and British objections to the treaty by proposing amendments, but it left core disputes over member states' voting powers and the size of the executive European Commission for the summit.
The Netherlands has been pressing for more legally binding rules anchored in the charter to enforce discipline within the EU's Stability and Growth pact on countries, such as France and Germany at present, which run excessive budget deficits.
Dublin suggested appending a declaration to the constitution reaffirming the EU's commitment to the pact and stressing the need for sound budgetary policy throughout the economic cycle.
EU sources said the declaration would not have been legally binding, and was the result of a German-Dutch compromise.
As a result, The Netherlands had been expected to drop its demand that the constitution should give the European Court of Justice power to supervise the enforcement of the budget rules. But Dutch Foreign Minister Mr Bernard Bot said he was unhappy with the Irish proposals, declaring them "unsatisfactory".
"We need something more," he said. "We stick to . . . our demands as far as the court's involvement is concerned."
Mr Bot made it clear that he would also stand up to demands by Germany and three other countries to water down proposed extra powers in the constitution for the European Commission, the EU's executive, to make countries reduce excessive budget deficits.