EU budget deal 'fair', says Blair

Europe's new budget deal paves the way for sweeping changes which will restore public confidence after the rejection of the constitutional treaty, Tony Blair said today.

The Prime Minister told Euro-MPs in Brussels that the summit accord last weekend, in which Britain gave up £1 billion a year of its rebate in return for a full-scale EU spending review in 2008, had been "the best we can achieve in the circumstances".

That review clause will come to be seen as of critical importance to Europe's future, said Mr Blair.

"As ever with these budgets, there were people who said it should be lower, and others higher. We thought it represented a fair settlement, helping the accession countries to plan ahead.

"There is a significant transfer of resources from wealthy to poorer countries. Structural and cohesion funds for accession countries go up from 24 billion euros to 170 billion euros."

Mr Blair went on: "In June I said we needed a financing deal allowing Europe to move forward but which set a long-term reform and restructuring perspective.

"I think the budget agreement we reached, with a Commission-led review in 2008, gives the opportunity to debate from top to bottom the EU budget, what we spend, what we spend it on, and how contributions are made - both the Common Agricultural Policy and the rebate - and allows us to look right from the very beginning at what a sensible, modern budget is.

"I think in time this will come to be seen as of critical importance - we really do need a seriously reformed budget for the future."

The Prime Minister acknowledged that any changes arising from a review required the unanimous approval of all member states but added: "There is a tremendous willingness across the member states to contemplate a more ambitious budget if it is in the context of a reformed budget."

Mr Blair said Britain's six-month EU presidency began in July just after the French and Dutch "no" votes on the constitution.

That setback had raised questions over Europe's future: "There was a simple task to perform - it was necessary to get the budget cleared. Once that was done, we had to return to those issues that I raised in June (in a speech to the European Parliament) - how do we reconnect Europe properly to the citizens?

"I suggest that we do so not by concentrating on our past achievements, which are immense and an extraordinary source of peace and prosperity over many years, but by responding to future challenges."

The challenges were globalisation, which required an EU with a complete single market including opening-up of the services sector, a European economy focusing on innovation, new technology and research and development, and continuing to champion EU enlargement.

"One of the best things that has happened to Europe has been the arrival of former central and eastern European states that come in as thriving and vibrant democracies.

"The lesson is, it isn't something we should fear, but something which adds to the strength of the EU."

That was why starting EU entry talks with Turkey and Croatia - one of the British presidency achievements - was important, why Macedonia has now been given EU "candidate status" under the presidency, and why some countries in the Balkans saw their long-term future as part of the EU.

Mr Blair said the EU summit last weekend had been an opportunity to settle a budget for the short term and, via the review clause, to begin a process that could lead to radical reform for the long term.

"That then allows us to adopt the agenda that is waiting there on issues of concern - the economy, illegal immigration, which is a huge issue for the future of Europe, terrorism, the environment."

Tackling those issues would enable Europe to be projected as of benefit to its citizens: "We have every chance of doing this in Europe now as a result of a budget deal which offers a perspective in which the future-of-Europe debate is taken forward without it being continually dogged by an argument about the budget.

"This is a good moment to take Europe forward."

Mr Blair said there was a point during the summit budget marathon when he decided what the European budget problem was that "the budget was like a house that had many different rooms in it, all constructed at different eras by different designers.

"The result is a building, but not one that really quite meets the needs of the modern world. That is perfectly understandable because of the way it has developed over time. So we got an immediate deal but we need a longer-term framework to meet future needs."

Mr Blair came under fire from MEPs complaining that the budget deal was not enough - and he saw red after attacks from UK Independence Party MEP Nigel Farage and Tory Roger Helmer.

Mr Farage said that during Britain's presidency the EU had produced more than 3,300 new legislative acts. It had opened EU memberships with Turkey despite a majority of EU citizens being against it and he had given away the British rebate.

Mr Farage wanted to know why one euro from the budget should go to "new sewers in Budapest" when public services in London were crumbling.

He said Mr Blair had been "outclassed and outflanked" by French President Chirac at the budget talks, because "unlike you, Chirac stood up for the French national interest".

Mr Farage added: "The reality is that Britain is isolated, alienated and completely alone in Europe."

Mr Helmer also attacked the loss of some of the British rebate, won 21 years ago by Mrs Thatcher.

He said: "As a British Conservative, I am appalled at how you have failed my country. You boasted that the British rebate was not on the table, period. Then you did put it on the table and you are now selling it in salami slices, with nothing in return but fool's gold and vacuous promises.

"Prime Minister, we hear that you are interested in your legacy - well, you will be remembered as the man who squandered Margaret Thatcher's legacy."

Mr Blair hit back at what he called political "reactionaries", pointing at Mr Farage and Mr Helmer, replying, with rising anger and to applause: "You sit there with our country's flag - but you do not represent our country's interests.

"This is the year 2005, not 1925. We are not fighting each other any more. These are our partners, our colleagues and our future lies in Europe. And when you and your colleagues say, what do we get for what we contribute to enlargement, we get a Europe that is unified after years of dictatorships in the east, and we get economic development, and we get a budget which puts for once and for all an end to the need for the rebate. That's what we get if we have the vision to seize it."

Mr Blair said there were three groups of people in politics: apart from the "reactionaries", there were the "commentators" who thought only Europe's interests should be considered.

Mr Blair went on: "Let's get a bit of reality. When you are a leader of a national country, it is inevitable that people are going to argue for their national interest - that is the challenge and the achievement of Europe, that despite people arguing rightly for their national interest, they can come to a collective agreement."

The third category was the "doers" - the kind of people, said Mr Blair, who won consensus for change and reform.

He said: "It won't be done by reactionaries or commentators, but by the doers."

After more than two hours of discussions, Mr Blair rejected complaints that his EU presidency had been a failure.

He said: "I think it is odd to describe as a failure an EU presidency which has achieved a very great deal in difficult cirumstances.

"Nothing else in Europe would have moved for months if we hadn't reached the budget agreement. Having cleared the budget out of the way, the thing is to engage seriously in the reform agenda.

"Setting out constitutional rules matters far less to Europe's citizens than saying what we are doing to improve the economy and on illegal immigration - that is the way to get Europe back on track."

Mr Blair added: "Whatever difficulties we have, it is a great tribute to the EU that different people from different parties and different countries come together and exchange verbal blows when 60 years ago they were fighting each other to the death."