European Union leaders have failed to agree on a new, seven-year budget after Britain and the Netherlands rejected a deal that had the support of almost all other member states, including Ireland. Denis Staunton, Mark Brennock and Lara Marlowe in Brussels, report.
As the 25 leaders met late last night after hours of bilateral negotiations, EU diplomats said that a final compromise proposal had failed. "It looks like it's been rejected," one diplomat said.
The negotiations broke down over the issue of Britain's budget rebate, which refunds two-thirds of that country's contribution to EU funds each year, and the size of the Dutch contribution to the budget.
Sweden, Finland and Spain also expressed reservations about the deal but diplomats said Britain and the Netherlands presented the main stumbling blocks.
Failure to agree on the budget will add to the sense of political crisis in Europe following the rejection of the EU Constitution in France and the Netherlands. EU leaders agreed this week to lift the November 2006 deadline for ratifying the constitution and a number of governments announced yesterday that they would postpone referendums planned for later this year.
The Taoiseach, Bertie Ahern, insisted yesterday that Ireland had not postponed a referendum, because no date had been set in the first place. However, Government sources confirmed yesterday that the intention had been to hold an autumn referendum, and that this would not now take place.
After more than 12 hours of negotiations in Brussels, Britain said it could not accept a proposal that would allow its budget rebate to rise to €5.5 billion from €4.6 billion after 2007 before freezing it until 2013. The Netherlands demanded a €1.5 billion cut in its annual contribution to the budget but was only offered €500 million.
"Graciously accepting an offer we rejected three days ago doesn't do it for us," a British official said.
Diplomats said that the remain- ing member states were ready to back a proposal from Luxembourg's EU presidency guaranteeing the level of farm subsidies until 2013 but would link any change in Britain's rebate after that date to a reform of the EU's farm policy.
The leaders met together for less than four hours before Luxembourg's prime minister, Jean-Claude Juncker, suspended formal negotiations in favour of bilateral talks with Britain, France, Sweden and the Netherlands.
French president Jacques Chirac insisted yesterday morning that farm spending was not negotiable but as the day progressed, he abandoned his demand that Britain's rebate should be phased out completely. Mr Chirac wants a special summit to discuss major issues facing the EU next year, after the end of Britain's EU presidency.
Mr Chirac and Germany's chancellor Gerhard Schröder sought to lay the blame for yesterday's failure squarely on Britain.
A budget deal is unlikely during Britain's six-month presidency, which starts on July 1st and failure to agree a new budget next year could put important spending projects at risk.
Portugal yesterday joined other member states including Ireland in postponing planned referendums on the constitution after the summit decided there should be a period of "reflection, explanation and debate". Denmark has also announced a postponement and the Czech Republic is expected to do likewise. The heads of state and government rejected the call by the president of the European Council, Mr Juncker, for a blanket freeze on further attempts to ratify the constitution. Instead, each country can choose its own pace for ratifying the treaty.
