European Union leaders have begun a crucial summit in Brussels amid fears that the crisis over rejection of the bloc's constitution by French and Dutch voters will be compounded by a deadlock over the union's long-term budget.
Although it is an unusually sunny day in Brussels, the mood at the summit is glum. The EU was plunged into a political crisis when the French and the Dutch rejected the constitution that was meant to streamline decision making in the 25-nation bloc. Now, a financial crisis looms, because failure to agree on a budget could paralyze the EU's investment programs.
Getting a deal on the EU's future spending from 2007 onwards was a priority for Luxembourg's prime minister, Jean-Claude Juncker. He saw a budget deal as a signal that, despite the constitutional defeats, the EU can still forge a common front and move ahead on vital issues. But Mr. Juncker now admits that an accord is nearly impossible.
Analyst Alasdair Murray, at London's Center for European Reform, says he does not hold out much hope for a successful summit.
"The idea that, you know, the EU can show that it's business as usual by getting a deal on the budget is out. Similarly, it's going to be still a problematic discussion about what to do abut the constitutional treaty," he said. "I think we will get some form of words, but the words will rather reveal the disagreements rather than the agreements, and whilst most people will believe the treaty is effectively dead, there will be one or two countries that continue to mutter about carrying on with the process."
Britain and some other countries say the constitutional process should be put on hold. France and Germany say ratification should go ahead in other countries despite the "no" votes, which effectively put the constitution in the freezer though, perhaps, not in the morgue.
But it is the budget battle that has most EU officials worried. French President Jacques Chirac is insisting that Britain give up the rebate it has had on its EU budget contributions for the past 20 years. The rebate, given to Britain when it was a much poorer country than it is today, saves it $5 billion a year. Mr. Chirac's call has been echoed by other countries and by the head of the European Commission, Jose Manuel Durao Barroso.
"The situation is no longer the same, and there are now ten new members who are much poorer than Britain, and I'm sure the British government recognizes that," he said.
Britain says the rebate is non-negotiable unless France agrees to review the EU's farm subsidy program, from which it benefits more than any other country. Mr. Chirac says "no" to that idea.
A budget deadlock would especially hurt the new member states from Eastern Europe that are counting on investment money from Brussels. Dariusz Rosati, a Polish member of the European Parliament, says the fight over money is unseemly and could hinder European integration.
"Of course, they undermine the confidence in the union, and many citizens may ask themselves the question whether the European construction is still valid and still viable," he said.
The battle over who gets how much money always brings out the worst in EU politicians. Analysts say it is easier for EU leaders to grandstand before domestic audiences and complain about how much they contribute to the bloc instead of talking about the advantages they gain from EU membership.