UK and France bridge finance gap at EU talks

The UK and France bridged old divisions over EU financing yesterday, with both sides making concessions to secure an agreement on a spending plan seen as key to restoring faith in the EU after a year of setbacks.

After two days of arduous talks, British Prime Minister Tony Blair won approval early yesterday of a final blueprint for the EU's 2007-2013 budget by offering to slash the UK's lucrative rebate and turning the savings over to the 10 countries that joined the bloc last year.

In return, Blair asked members, particularly France, to agree to a spending review in 2008-'09 that could lead to cuts in the EU's massive agricultural subsidies. France benefits significantly from farm subsidies.

"This is an agreement that allows Europe to move forward, allows us to demonstrate the right solidarity," Blair said.

Blair EU spending from 2007 to 2013 to 1.045 percent of Gross National Income (GNI) -- a move many thought would be incompatible for an EU wishing to take on a bigger economic and political role on the world stage.

Yet that offer was already a concession to Germany and France, which push for more spending after the UK originally sought to cap spending at 1.03 percent of GNI.

"Once more, we have overcome a crisis," French President Jacques Chirac said.

The EU was badly seeking to bounce back from the political setback of having its draft constitution rejected in both France and the Netherlands.

On top of that, budget talks in June collapse over the British rebate issue.

Blair, whose country holds the rotating EU presidency, ended that bitter deadlock over finances by offering further cuts to his country's disputed rebate.

He proposed a total financial package of 862.4 billion euros (US$1.04 trillion) for 2007-2013, bowing to French and German pressure to increase an earlier offer by some 13.2 billion euros.

Risking political backlash at home, Blair offered to cut the UK's budget rebate by 10.5 billion euros over seven years -- a substantial increase into EU coffers that would help fund economic development in the 10 new member states across eastern and central Europe.

Chirac lauded Blair's commitment on securing a deal.

"I want to underline the politically difficult gesture Prime Minister Blair made by accepting a rebate that will be changed drastically," he said.

EU met for two days of grueling talks, meeting for a final session early yesterday after hours of wrangling over the complex financial package.