The European Union was plunged into political crisis on Friday night after Britain led the way in blocking a proposed deal on the new seven-year budget
Tony Blair, the UK prime minister, was one of a minority of leaders who refused to accept a compromise package, as the Brussels summit collapsed in acrimony shortly before midnight. The failure of the talks means the transfer of billions of euros of aid to former communist countries in eastern Europe, due to start on January 1 2007, may be delayed.
The political ramifications of the breakdown, coming after French and Dutch voters rejected the EU constitution, could be severe...
Other countries also rejected the final proposal. The Netherlands and Sweden insisted they were paying too much, while Finland and Spain registered their opposition once it became clear there would be no agreement...
With the EU constitution on hold indefinitely and the budget row unresolved, José Manuel Barroso, European Commission president, has warned that Europe could slide into “permanent crisis and paralysis”.
Here is the central sticking point at the moment:
Throughout most of Friday Mr Blair faced near-isolation after he rejected a seven-year EU financial package worth about €870bn. He refused to accept a Luxembourg proposal to fix the annual British budget rebate at about €5.5bn roughly its current level for the 2007-13 period...
Britain wanted to trade the rebate for changes to the EU's farm subsidy regime, of which France is the main beneficiary.
Tony Blair, of course, is slated to ascend to the EU presidency, an event that now raises a whole bunch of questions. Again, from the FT:
Tony Blair's decision to veto the European Union's potential budget deal on Friday will trigger accusations across mainland Europe that he has seriously damaged Britain's imminent presidency of the EU.
Britain is keen to get the EU to approve a wide range of initiatives over the next six months including the start of talks over Turkey's entry into the EU and passage of the services directive. Having stood up so boldly for Britain's national interest last night, the prime minister may now find it harder to present himself as a conciliator who can persuade member states to make compromises...
The prime minister ends this summit at odds with the EU's 10 new member states the central and east Europeans whom he has so often sought to champion in the past.
These 10 states wanted a deal on the EU budget to be agreed last night because failure to do so leaves them receiving structural support funds at a lower level than they had hoped. How much they will blame Britain for this failure remains to be seen.
It may be that not everyone is unhappy about this:
... Mr Blair has been outmanoeuvred by Mr Chirac, keen to deflect attention from the disaster that befell him last month after failing to get a Yes vote in the referendum on the European constitution. Leading pro-Europeans in Britain are bound to argue that last night's veto marks one more stage in the prime minister's abandonment of his once cherished goal of taking Britain into the heart of Europe.
Seasoned observers of EU summits said Britain was too slow to fend off Mr Chirac's assault on the rebate. “Blair started to make the argument about the need for structural reform of the CAP far too late in the day,” said Peter Ludlow, an analyst of the EU. “Blair therefore overcompensated. He started to make a defence of the UK rebate that was far too uncompromising and unrealistic.”
And there is this, from the first FT article:
The British rejection of the deal was a political gift to Jacques Chirac, the French president, since it distracted attention from his country's No vote to the constitution and allowed him to assume the moral high ground.
Mr Chirac accused Mr Blair of a lack of solidarity with Britain's allies in eastern Europe, saying it was “indispensable that the United Kingdom in future takes its full part in the financing of the enlarged Europe”.
Developing.
UPDATE: Mark in Mexico offers his "no comment, no opinion, no advice", and links to many a blog with the same. Calculated Risk had an early post on the collapse of the talks. Edward at A Fistful of Euros supplies his usual thoughtful analysis.