Moeilijke eurotop kondigt zich aan (en)

EUOBSERVER / BRUSSELS - EU leaders will begin a crucial meeting this evening with hopes fading fast for a deal on the budget and with no clear idea of how to get the union out of its current constitutional mess.

How they deal with both issues is likely to determine how the bloc is perceived, with no agreement and disputes leading to the impression that the EU is in permanent crisis.

But the situation on the budget does not bode well for a deal. A compromise proposal brought forward on Wednesday by the Luxembourg EU presidency and which goes some way towards Britain's stance on its annual rebate has already been rejected by London.

Luxembourg had proposed that the rebate be frozen at its current levels (€4.6 billion) in 2007 and then left at this level. Previously it had suggested that it be gradually reduced after 2007.

However, according to British media, London has already rejected this. The Financial Times reports that Tony Blair will instead propose that the rebate should not be frozen but that new member states should not be asked to contribute to it.

But the British rebate is not the only contentious issue - farm subsidies is another. Under Luxembourg's proposal Bulgaria and Romania would be funded from the current farm subsidies meaning less all around when the two countries join, probably in 2007.

Moral upper hand

Acceptance of that proposal will depend on president Jacques Chirac, the fierce protector of the French farmer. London and Paris have been trading insults with both feeling that they have the moral upper hand.

Another country that will be essential for a deal is the Netherlands. Still smarting from voters' rejection of the constitution on 1 June, the government is playing hardball about how much it should have to pay into EU coffers - at the moment the Dutch pay the most per capita towards the EU.

Reflecting the difficulties ahead, Luxembourg prime minister Jean-Claude Juncker said on Wednesday "I am pretty sure we won't get the financial perspectives through at this summit".

While the budget discussion will be about hard facts and figures, the other issue on the table will be a bit more abstract - what to do about the EU constitution?

Genuinely political discussion

According to commission president Jose Manuel Barroso, there will be "a very difficult and genuinely political discussion" on the constitution.

Leaders are expected to suggest that national governments carry on with ratification as they see fit - this will in reality mean that governments may shelve their plans for referendums, with Denmark, Poland and Ireland likely to do this.

Legally, the constitution can only be brought back on track if France and the Netherlands vote again and vote differently. However, the resounding no in both countries makes this politically virtually impossible.

But without a clear statement of intention from Paris and The Hague, the legal situation of other countries that might go ahead and ratify will remain unclear.

One of the toughest things they will have to deal with is the mechanism for coming out of this period of delay, which could otherwise stretch on for years.

According to Mr Barroso, who himself is pleading for a period of reflection, the EU will have to solve the constitutional mire it finds itself in or "sink into a permanent crisis and paralysis".

The constitution will be discussed this evening (16 June) over dinner while the EU budget will be dealt with on Friday. With fears that the summit could run over into the weekend, some ministers have arranged to travel back on Saturday already.

With these two issues set to dominate the summit, other topics have taken a back row seat. EU foreign ministers deliberately decided earlier this week that there should be no extended discussion on enlargement given the uncertainty created by the constitution rejections.

Instead, the summit conclusions are not to make specific mention of enlargement progress for Bulgaria, Romania, Turkey or Croatia.