No Better Deal to Come Says Britain as Europe Nears Crisis

Germany's hopes that a deal could be reached for Europe's 2007-2013 spending plans at an EU summit starting Thursday took a blow after Britain announced that it had made its best offer to end the standoff over the European Union's long-term budget and said that no better deal was likely for at least a year, according to a British EU presidency official said in Brussels on Wednesday.

"We will see no better deal this week or next year," the official said on condition of anonymity, on the eve of an EU summit focused almost entirely on ending the impasse over the bloc's 2007-2013 spending plans.

"We remain convinced that these proposals remain the best basis for agreement and that there is very narrow room for negotiation," he said, after Britain put its second compromise proposal on the table for its EU partners.

The announcement will have disappointed many awaiting Britain's revised proposal, none more so than German Chancellor Angela Merkel, attending her first EU summit in her new leadership role, who had previously called for the British EU presidency to do all it could to avoid what she described as a "not unimaginable" breakdown.

Merkel wants budget deal but not at any price

Speaking after talks in Brussels with Dutch Prime Minister Jan Peter Balkenende on Tuesday, Merkel said she was "waiting impatiently for the next proposal from the British presidency" to break the budget deadlock and was hoping that there would be a viable option on the table before Thursday's summit.

However, the chancellor said she was not prepared to compromise unnecessarily. "We want a result but naturally not at any price," said Merkel, who warned that failure to hammer out an agreement could throw Europe into a difficult period of uncertainty. "I believe that Europe in general currently finds itself in a difficult situation and if we cannot reach agreement, which is not unimaginable, then we will remain in this difficult situation," she said.

Barroso attacks Britain's lack of ambition

Before the slightly modified British package was announced, European Commission President Jose Manuel Barroso went further than the German chancellor by attacking what he called Britain’s lack of ambition. "Europe's credibility is severely damaged when some do not put their money where their mouth is," he told the European Parliament in Strasbourg.

"Does it not concern the British presidency that the strongest supporters in this chamber of this proposal come from those who (hold) the narrow-minded, nationalistic, backward-looking vision of Europe?" he asked to applause.

The 2007-2013 budget is worth more than 800 billion euros ($944 billion) and contains much-needed funds for the EU's relatively poor new members, mainly from central and eastern Europe.

The spending plans, the first to take into account the 10 newest members, are blocked by two old issues: Britain's refusal to give up its budget rebate and France's refusal to cut the bloc's long-disputed farm subsidy system.

In limbo for most of the year, the budget project should have been resolved at the last major summit in June, but it still remains in doubt six months on. And with tense negotiations planned for Thursday and Friday this week, time is running out for a resolution before Britain’s presidency ends in January.

More aid for new states but rebate is off the agenda

Britain's original package issued last week was almost unanimously rejected, and British officials announced at the start of this week that the second draft would be little different from the first which proposed a cut of 14 billion euros ($16.49 billion) or 8.5 percent in aid to poor ex-communist newcomers to the bloc and detailed a continued rise of Britain’s own rebate over the next seven years.

The latest package offered only a slight restoration of aid cut from the new east European members, a modest reinstatement of rural development funds for western Europe and added 2.5 billion euros ($3.01 billion) to overall spending, raising it to 849.3 billion euros or 1.03 percent of EU output from 1.026 percent in last week's proposal.

There was no mention of reducing the annual British refund to meet a share of the costs of the bloc's eastward enlargement which leaves open one of the most contentious issues for the 25 leaders at the coming summit.

"We remain convinced that these proposals are good for Britain and good for Europe and offer a sound basis for agreement at this week's European Council," British Foreign Minister Jack Straw said in a statement.