Budget deadlock hangs over summit

ON THE eve of the Edinburgh summit, Britain yesterday tried to break a deadlock in setting EC finances for the rest of the century by offering more money to poor member states.

But the proposal to boost the cohesion fund for the poor states to 13.5bn ecus ( pounds 10.62bn) from the earlier offer of 12.25bn ecus still fell below the 15bn Ecus demanded by Spain, and the the EC commission President, Jacques Delors told the Prime Minister, John Major, that the proposal was still too low.

Mr Major, meeting Mr Delors before dining with the French President, Francois Mitterrand, replied that all member countries were facing budget deficits and public spending constraints.

The Spanish Prime Minister, Felipe Gonzalez, set the stakes deliberately high, by explicitly linking the budget question and the problem of the Danish ratification of Maastricht, when he said he would press other states, especially Britain, to honour the commitments in the treaty on regional spending and a new cohesion fund, as well as pushing for a date for ratification.

This suggests Spain will be one of the harder states to win round. 'Spain could block progress; it will take very delicate negotiation,' predicted the Dutch Minister for European Affairs, Piet Dankert.

Some optimism emerged on the Danish problem yesterday when a key figure in Denmark's opposition suggested recent developments had made possible 'a compromise that could lead to ratification by summer'. At a pre-summit meeting of European socialist leaders, Ove Fich, standing in for the leader of the opposition Danish Social Democrats, said reworked proposals, drafted to meet Danish demands for opt-outs on common currency, defence and EC citizenship, cleared away 'all but a few minor political problems'.

From the two core problems - the budget and Denmark's referendum vote rejecting the treaty - flow the further issues of how to make the Community more accountable and open, and when and if to enlarge its membership. No one is confident these interlocking issues can be resolved. 'We will get agreement on all or nothing,' a senior British source predicted this week.

The Prime Minister's tactics are to solve the Denmark problem and make progress on subsidiarity first.

The hope is that, encouraged by the knowledge that Maastricht is certain to be ratified and the new financial commitments contained therein honoured, member states will be in a mood to advance from entrenched positions on the budget. The future financing debate is essentially a battle between rich and poor members as to the size of the EC budget and how to distribute the dividends of the EC's dwindling prosperity.

The poorer states are using money as bargaining tool, refusing to relax an agreement that the Community cannot be enlarged until the budget is agreed.

Finally, having set the Community's house in order, Mr Major hopes to crown his summit, marking the end of the British presidency, with an announcement of a modest growth initiative to show that Europe's leaders are aware that ending the recession is the top issue on the public's agenda.

Rubik's Cube, page 8

Letters, page 18

Europe's failures, page 19

Andrew Marr, page 19