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Friday, March 26, 1999 Published at 12:19 GMT

Business: The Economy

Euro budget breakthrough

Chirac and Schröder: Tough talking between all leaders

European Union leaders have finally reached agreement on a complex reform of the organisation's 85bn euro (£60bn, $93bn) budget.

EU in crisis
It took the political leaders assembled in Berlin 20 hours of talks before they managed to strike a compromise in the early hours of Friday morning.

The new budget guidelines cover the next seven years, until 2006, and pave the way for new members to join the European Union. These include Poland, Hungary, the Czech Republic and Cyprus.

[ image:  ]
The UK Foreign minister Robin Cook said the deal meant that the EU could afford to take in poorer countries from Eastern Europe. A Polish spokeswoman said her government was "delighted" at the outcome.

The mixture of compromises reached reflects differing national demands. France stood staunchly by its farmers, Spain defended its development aid and the UK refused to leave without its special budget rebate intact.

The agreement curbs the farm subsidies that eat into 42% of the EU's annual budget, although not as much as many had hoped.

It also reallocates spending on poor regions, which eats up another third of the budget. Again cuts are not quite as drastic as first planned.

BBC Correspondent Angus Roxburgh: A deal that satisfies no-one entirely
One of the potentially most significant changes is a new method of calculating contributions to the EU budget.

Currently every country sends a proportion of its VAT revenue to Brussels. By 2004 much of the budget contributions will be calculated as a proportion of Gross National Product.

UK rebate saved

BBC Correspondent David Shukman: This shows the EU at its worst
The union's richer countries, Germany, the Netherlands, Austria and Sweden, failed to secure the sharp cuts in their budget contributions they had hoped for, although they managed to negotiate some reductions.

[ image: Germany's Chancellor Gerhard Schröder shows the wear and tear of all-night negotiations]
Germany's Chancellor Gerhard Schröder shows the wear and tear of all-night negotiations
Germany, for example, wanted a reduction in its net payment of 3.5bn euros ($3.8bn). Officials said it ended up with a cut of only 700m euros ($760m).

The Netherlands fared better. Its annual net contribution to the EU budget will be lowered by "a bit more" than 1.3bn euros, according to the Dutch Finance Minister Gerrit Zalm.

Foreign Secretary Robin Cook: Britain's rebate intact
The United Kingdom, meanwhile, managed to defend its special rebate - now worth around 3.5bn euros (£2.33bn - $3.8bn) - which was originally agreed in 1984.

"Our net contribution remains as it is," Prime Minister Tony Blair told a news conference. "Not a euro more, not a euro less."

'Good moment for Europe'

The German hosts of the summit, current holders of the rotating EU presidency, were clearly relieved that they had managed to secure a breakthrough.

[ image: Jacques Chirac fended off the deep cuts in farm spending that other EU countries had argued for]
Jacques Chirac fended off the deep cuts in farm spending that other EU countries had argued for
Germany's Chancellor Gerhard Schröder, who spent all day Thursday in one-to-one negotiations to explore a compromise, said: "It is through and you are looking at the people who worked hard to bring it about."

However, he admitted that Germany had failed to push through its demands.

The French Prime Minister Lionel Jospin called the breakthrough "a good moment for Europe".

Belgian's Finance Minister Jean-Jacques Viseur, spoke of a "good agreement" but regretted that "a number of savings had to be postponed".

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