Money talks loudest at Brussels summit

Franco-German talks drove the deal through

Iolo ap Dafydd BBC Wales Europe correspondent

There were three talking points here at the EU summit in Brussels.

And to borrow from Tony Blair - who has delivered a lightning re-shuffle of his Cabinet following the surprise resignation of his Education Secretary, Estelle Morris - they can be summed as: money, money and money.

This summit was the first to be held in Brussels during a presidency of another nation - Denmark - solely to reduce costs as well as to boost security.

And, as it was a crucial part of the process of enlarging the European Union (following the undoubted relief of the "Yes" vote in Ireland's latest referendum on the subject) the idea of saving a few euros here and there was not without a certain irony.

The three main topics were financial, with the most pressing for some being by how much should Common Agricultural Policy be cut once the 10 new countries join, probably in 2004.

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Cyprus

Czech Republic

Estonia

Hungary

Latvia

Lithuania

Malta

Poland

Slovakia

Slovenia

Then there are the structural funds, which Wales is benefiting from with Objective One money during the current 2000-2006 EU budget.

If agriculture swallows more than half the EU's annual budget of 95 billion euro, the structural grants swallow almost an equal half.

The main recipients of "structural" cash are Spain, Greece, Portugal, Ireland and France, which also happen to be the main beneficiaries of the CAP.

No wonder it's not in their political vocabulary - or will - to face the challenge of reducing these schemes in favour of the impoverished eastern and southern European countries who want to join the club.

It is Germany, Britain, Sweden and the Netherlands which foresee an EU which might go bust if the same level of subsidies are given to the new entrants - nations of varying economic power which are far more reliant on agriculture.

If enlargement is to work, claim many European politicians and civil servants, then the EU needs to be generous. And 25 billion euro over the first three years should cover it.

Fuss

But there were also arguments over the third main financial issue: how much the new countries should - or can - afford to pay into EU coffers.

We're not talking huge powerful economies here - Malta, Cyprus, all the Baltic States and perhaps Slovenia from the former Yugoslavia have a combined gross domestic product (GDP) smaller than that of Wales.

The combined economies of all ten entrants would not match that of the GDP of the Netherlands.

Yet they'll have power, from sitting in EU summits, have members in the European Parliament, and will help shape EU policy in years to come.

So why all the fuss about money?

Simply that the new countries do not want to feel like second-class citizens and lose out on a gravy train which has established a generous subsidy culture.

EU "compromise"

However, those funds can't keep coming unless member states pay more into the EU's coffers.

Britain has for years enjoyed a rebate on its payments while the French receive more from the CAP than any other country.

Others countries enjoy twice as much EU funding as their governments pay in.

That can't last, especially with the poorer former-Soviet nations trying to be compete against the Western European economies.

So the compromise, in typical European Union fashion, discussed and agreed by President Chirac of France and Chancellor Schroeder of Germany even before the summit started, might not bring any savings at all.

As France has got its way, with the current CAP payments not being touched until 2006, where is the shortfall going to come from?

Ever-smiling

Perhaps that is why Chirac drew such attention to Britain's Thatcher-argued rebate, which dates back to 1984.

Tony Blair successfully kept the rebate going in 1999.

But when his convoy turned up in Brussels, and a conspicuously-armed guard stepped out to open his car door, perhaps even our ever-smiling PM felt some of his summit counterparts were hoping for the chance to make a re-shuffle of their own.

It's easy to see why the French are eyeing the UK's rebate as a way of finding more money for Europe's future.

The truth is Tony Blair has a fight on his hands regardless of whether Britain's tax rebate is part of the financial haggling on enlargement or not.

And all this behind closed doors...