British Prime Minister Tony Blair's government unveils its proposals for the EU's budget yesterday, hoping an offer to sacrifice part of its cherished rebate will help secure a deal on future financing.
According to British officials, Britain will propose cutting economic aid to the EU's new member states by around 10 percent and offer to scale back its rebate, worth some 4.6 billion euros (US$5.5 billion) a year.
Officials have signaled that Britain will forego a substantial chunk of the rebate, reportedly up to 15 percent, by excluding from the complex calculations the economic aid spent on new member states. The bulk of the rebate will remain intact, however, until the EU agrees to slash farming subsidies. Britain will call for a review of EU spending, including agriculture, in 2008-2009.
European leaders will have just 10 days to consider the proposals for the 2007-2013 budget before a crunch Dec. 15-16 summit in Brussels, Belgium.
Britain has warned that tough negotiations lie ahead.
Blair plans one-on-one meetings Thursday and Friday with the leaders of Portugal, Finland, Slovenia, Sweden, the Netherlands, Luxembourg, Ireland, Greece and Spain. Failure to reach agreement would be a crippling blow to the 25-nation bloc, still reeling from France and the Netherlands rejecting the EU's first ever constitution earlier this year in referendums.
The budget negotiations are politically dangerous for current EU president Blair, risking his reputation as an international deal broker and supplying ammunition to critics at home who are furious he is prepared to forego a chunk of Britain's rebate.
The proposals were to be circulated to member states in Brussels and unveiled to British lawmakers in the House of Commons later yesterday.
Britain is considering substantial cuts to the European Union's seven-year budget and says the US$1.02 trillion package proposed by Luxembourg in June was too big. That represented 1.06 percent of the bloc's gross national income, a figure London is considering trimming to 1.03 percent.
Britain is also proposing to cut the level of economic aid paid to the bloc's 10 new member states. Blair is trying to sweeten the plan by making it easier for them to access and absorb the funding. But talks in Estonia and Hungary last week ended without an agreement and he risks alienating countries such as Poland which he regards as important allies.
An equally thorny problem for Blair is the budget rebate, a totemic political issue in Britain.
The cashback guarantee was secured in 1984 by former Conservative Prime Minister Margaret Thatcher, who successfully argued that Britain paid a disproportionate amount into EU coffers and received little back in regional grants and farming subsidies.
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