EU sets farm payments for new members

Europe's costly farm subsidies must be reformed because they damage the developing world, Tony Blair warned last night as Britain and France squabbled publicly over financing the EU enlargement.

Hours of furious wrangling at the Brussels summit ended with agreement on €45bn-worth of budget and agricultural payments (£28bn) being offered to the 10 countries joining in 2004.

It followed this week's unexpected agreement between France and Germany, sidelining and annoying Britain, which appeared to damage hope of radical change to the common agricultural policy.

With Jacques Chirac, the French president, still sniping at Britain's long-established entitlement to a budget rebate, the foreign secretary, Jack Straw, was adamant that far-reaching reform remained firmly on the agenda.

"This has been a very successful summit and represents a major step forward towards enlargement," the Danish prime minister Anders Fogh Rasmussen, who chaired the meeting, declared.

"There is no reason to hide that we have been through very difficult and tough negotiations."

Earlier Mr Blair expressed his deep concern about the agreement reached between Mr Chirac and the German chancellor, Gerhard Schröder, before the summit to keep the CAP at £30bn a year from 2006 to 2013.

"The truth is that the CAP does damage to the developing world and reform is inevitable," the prime minister insisted during a break in the negotiations.

"We have to make sure there is change.

"We understand the concerns countries have about protecting their agriculture, but the world is only moving in one direction and that is liberalisation."

The Chirac-Schröder agreement represents a revival of the Franco-German axis, once an indispensable feature of EU politics, whose decline in recent years has allowed Britain to build ad hoc alliances and pursue its own economic and political goals.

"If there is no Franco-German accord, Europe grinds to a halt," the visibly delighted Mr Chirac said. He accused Britain of avoiding paying for enlargement, because its rebate remained untouched.

The reform-minded Sweden and the Netherlands were also disappointed, but like Britain had little choice but to acquiesce in the failure to slim down the CAP - which takes almost half the entire EU budget.

Mr Chirac is always a fierce defender of French farmers, who are still the main beneficiaries of subsidies from Brussels. Diplomats said he appeared to have emerged the winner of the two-day summit.

But Mr Straw said: "It is a good deal for Europe, for the UK and a good deal for the nations that want to join the EU.

"Meaningful reform for the CAP stays on course," he insisted.

Pushing its luck, France tried but failed to remove a communique pledge that CAP spending must be compatible with the EU's international obligations under the Doha trade liberalisation round.

Despite bickering about money, all 15 leaders employed lofty language to endorse the goal of completing the talks with candidates for membership at the Copenhagen summit in mid-December so that they can join in 2004.

"The historic process launched in Copenhagen in 1993 to overcome the divisions throughout our continent is about to bear fruit," they said.

Mr Rasmussen said the candidates would be offered direct farm payments at 25% of the level paid to the current member states, rising gradually to 100% a decade later.

In addition they would be guaranteed that they would not be worse off after joining than before - with lump sum compensation if necessary.

"We're witnessing a major turn-around," the Czech foreign minister, Cyril Svoboda, said.

But the Polish foreign minister, Wlodzimierz Cimoszewicz, said the final phase of negotiations "will not be easy, pleasant or satisfying for anyone."

The 10 candidates are Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Lithuania, Latvia, Estonia - all former communist countries - Cyprus and Malta.

The summiteers said Bulgaria and Romania would be encouraged to join the EU in 2007. But it was still unclear whether Turkey would be given a date for opening talks.

Both issues, in any event, will not be finalised until Copenhagen, where the accession talks are to be concluded.

In Ankara the Turkish foreign minister, Sukru Sina Gurel, said that his country would "review" relations with the EU if no date was set within the year.

Mr Blair forcefully dismissed Mr Chirac's suggestion that Britain's rebate, worth €7bn, or half of the UK's EU contribution, would be up for grabs in future financing arrangements.

Pressure for a successful outcome in Brussels increased after a barrier to enlargement was removed last week when Ireland voted to approve the Nice treaty, which adapts EU institutions for a union of 25.

The summit also backed a deal to defuse a dispute with Russia about travel to and from its Baltic enclave of Kaliningrad, which will be surrounded by EU members once Lithuania and Poland join.