Leaders of the 25-member European Union, meeting for the second day at a summit in Brussels, are struggling to resolve deep differences over the size and content of the bloc's long-term budget. The leaders are aware that failure to reach an agreement could jeopardize the union's credibility and plunge it into a financial crisis.
It is up to Britain, the EU's current president, to find a way out of the deadlock. But Britain is also part of the problem because Prime Minister Tony Blair cannot politically afford to give up more than just a part of his nation's treasured annual refund from EU coffers that was secured more than 20 years ago by former Prime Minister Margaret Thatcher. The rebate was given to Britain because it was then one of the EU's poorest members. Now it is one of the richest, and other EU countries say that the rebate is an anachronism and should be eliminated.
Mr. Blair was to present a final, take-it-or-leave-it offer that diplomats say will include a further reduction in the British rebate, more money for the new, mostly East European members that joined the bloc last year, and a proposal that the union's agricultural spending, which mainly benefits France and Spain, be reviewed sometime before 2013.
The diplomats say that the shape of a deal is emerging although bargaining over who gets what out of the budget is still fierce, as negotiators try to balance Europe's interest against each country's national interests. British Foreign Secretary Jack Straw says the room for maneuver is narrow but that he hopes a deal can be achieved.
"This is a responsibility for all 25 member states. There is a heavy responsibility on the United Kingdom as [rotating president of the EU]. But it's in the nature of these negotiations that we all talk about solidarity, and solidarity inside the European Union is very important," he said. "But, for every member state, they have to also take full account of their national interest. And this is what makes these negotiations interesting. At 25, they are difficult."
Britain's earlier proposals would have deprived some newer Eastern European countries of the funds they are supposed to get to build new roads and other infrastructure, starting in 2007. Some of the new members are willing to make sacrifices in order to strike a deal, but others, especially Poland, are not. But a Polish diplomat says his country, too, believes a deal could still be hammered out in late bargaining.
The head of the European Commission, Jose Manuel Barroso, pleaded Friday for Britain to be more generous to the new member states but said all countries have a responsibility to reach an agreement.
"Everybody has to move, not just Britain, not just the British presidency. But one thing I'd like to say to my British friends is the following: You have invested a lot in this enlargement. You want an enlarged Europe. And an enlarged Europe needs additional resources. So this is about making an enlarged Europe work," he said.
Not everyone is optimistic about the possibility that a deal can be reached. Swedish Prime Minister Goran Persson says there is only a 50 percent chance that an accord can be struck. But diplomats are now saying that the best they expect to get out of the latest British proposal is an elegantly worded compromise that will not entirely satisfy everybody but will at least break the budget impasse that has threatened to cast the European Union into a prolonged period of paralysis.