Blair heads for rebate row at EU summit

Mr Blair has warned EU leaders including Jacques Chirac, the French President, that he will not allow next week's meeting at Hampton Court Palace to be turned into a renewed attack on Britain's rebate.

The Prime Minister wanted to focus next week on the economic threat to the EU by globalisation, code for the growth of China and India, which led this summer to the row over protectionism against Chinese cotton exports. "Next week is not about the budget," said the official spokesman for Mr Blair, who will host the talks because the UK holds the EU's rotating presidency.

In June, Britain was blamed by many countries for the collapse of talks over the EU's budget for 2007-13, when Mr Blair refused to compromise on the UK's annual €5bn (£3.4bn) rebate unless the EU's multibillion-euro farm subsidies were curbed.

That angered several nations and alarmed the 10 countries that joined the EU last year, because they stand to gain most from EU subsidies. The leaders of Poland, the Czech Republic, Hungary and Slovakia want the so-called Financial Perspectives discussed at Hampton Court.

But in a formal letter to fellow EU leaders, Mr Blair said he hoped to avoid detailed talks on the budget until December, and wants to discuss global economic challenges to the EU.

European leaders are at odds over the extent to which the bloc should pursuit free-market, economically liberal measures to promote restructuring.

Mr Blair, who will address MEPs in Strasbourg on Wednesday, said the questions the summit should tackle included terrorism, asking how Europe could help to create a "safer world' outside its borders. He wants to delay negotiation on a budget deal until the final British EU summit in December.

The Prime Minister said: "I believe agreement can and should be reached at the December council and I will make every effort personally to achieve it by then, including through personal contact with each of you.

"I will update you further briefly at the meeting on how we are taking this forward through November. But I hope we can avoid getting into detailed discussions of the future financing issue at Hampton Court."

Yesterday in Die Zeit newspaper, Mr Schröder reopened the wounds dating from June when he and Mr Blair clashed openly. The outgoing Chancellor said it was "almost negligence to let the negotiations on the Financial Perspective in June fail".

In an implicit criticism of Mr Blair, he added: "Germany went, in these negotiations, to the very limit of what is possible and might have gone a little further. Others remained on their positions without moving one millimetre."

Mr Barroso has made five proposals to "relaunch negotiations" on EU financing. They included introducing a fund to help those suffering from globalisation, and ring-fencing 60 per cent of cohesion spending on projects related to competitiveness. He also suggested a comprehensive review of the structure and expenditures of the EU budget in 2009 so changes could be made in the next long-term budget after 2013.

Mr Barroso also wants to shift 1 per cent of agriculture spending to help promote a broader rural development objective. Mr Blair has promised to put the UK rebate on the table, if the Common Agricultural Policy is reformed.

Different visions for Europe

NORDIC MODEL
Very high levels of state investment in education, social welfare and research and development has produced high productivity in countries such as Sweden, Finland and Denmark. Benefits include re-training for those who lose their jobs, and childcare facilities that allow a high proportion of women to work. The Nordic model is sustained by very high taxes, which are actually popular in countries such as Sweden where voters believe they get good value from public services. But this idea might not be easily exported.

ANGLO-SAXON MODEL
The most free-market of the European economies, the United Kingdom's and Ireland's economies are the closest to a United States-style approach in the European Union. The UK has seen high economic growth, low inflation and very low unemployment over recent years and has boosted its state spending. However, public services remain below the standard of those in several continental countries, and the UK still suffers from a long-hours work culture because of its poor levels of productivity.

FRANCO-GERMAN MODEL
Along with Belgium, the French and German economies have less flexible labour laws than the UK, and greater trade union influence. Once the motor of European growth, the French and German economies have lost their dynamism, with relatively high unemployment and with Germany still struggling from absorbing the former Communist East Germany. Both still enjoy high levels of social protection, and voters appear reluctant to go through the painful process of economic reform.