EU enlargement breakthrough

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European Union leaders claimed a breakthrough on Thursday on the
path to expanding the bloc into eastern Europe after France and
Germany reached a landmark deal to control farm spending after
2007.

European Union leaders claimed a breakthrough on Thursday on the path to expanding the bloc into eastern Europe after France and Germany reached a landmark deal to control farm spending after 2007.

Danish Prime Minister Anders Fogh Rasmussen hailed progress after chairing a working dinner of the 15 leaders, saying they had endorsed European Commission proposals to phase in direct farm payments to new member states gradually from 2004.

"Tonight we have experienced a real breakthrough,"​ Rasmussen declared, saying he expected to receive on Friday a negotiating mandate for the final phase of enlargement talks.

That would keep the EU on track to conclude accession agreements with Poland, the Czech Republic, Hungary, Slovakia, Slovenia, Lithuania, Latvia, Estonia, Cyprus and Malta at a Copenhagen summit in mid-December.

It was the second leap forward in a week for the ambitious enlargement project, meant to heal Europe's Cold War scars, after Ireland voted in a referendum last Saturday to approve the Nice Treaty adapting EU institutions for an enlarged Union.

But the Franco-German compromise could anger supporters of reform of the costly Common Agricultural Policy, which swallows nearly half the €95 billion EU budget.

Critics fear it will undermine Commission plans to radically overhaul farm subsidies next year and perpetuate huge levels of farm spending for another decade.

Rasmussen also announced late on Thursday that the EU had reached agreement with the Czech Republic and Slovakia on fair competition policies, involving state aid to private firms.

Chancellor Gerhard Schroeder and President Jacques Chirac announced the farm spending deal after private talks at a Brussels hotel, although French and German officials later gave divergent accounts of what exactly had been agreed.

Schroeder told reporters they proposed that direct farm payments to new member states be phased in from 2004, while overall farm spending would be frozen in real terms from 2007.

"From 2007, spending will be capped and will not increase beyond the rate of inflation up to 2013,"​Schroeder said.

Chirac said they agreed to control spending in all areas, not just agriculture, and limits should also apply to aid to poorer regions and, in his view, to Britain's EU budget rebate.

A British spokesman said the annual rebate, won by Prime Minister Margaret Thatcher in 1984, was not up for negotiation.

Italian Prime Minister Silvio Berlusconi sounded a note of caution, saying whatever was agreed on farm spending must be compatible with the EU's international obligations under the Doha world trade liberalisation round.

The Franco-German agreement tore apart a "Gang of Four" - Germany, Britain, Sweden and the Netherlands - who had been fighting to cut back and reform the CAP.

It also marked the resurrection of a Franco-German axis that dominated European integration from the 1950s until the early 1990s but had gradually broken down since German unification and seemed in disarray only a few months ago.

"It's a good agreement for the Franco-German relationship. This shows that it is working fully and that France and Germany can take responsibility in the service of Europe,"​ French Foreign Minister Dominique de Villepin said.

But de Villepin contradicted German accounts of the accord by saying the freeze on agricultural spending did not apply to rural development funds, nor to farm aid for Romania and Bulgaria when they join, possibly in 2007.

Net contributors to the EU budget, such as Germany, are worried at the long-term cost of admitting the mostly ex-communist applicants, including poor agrarian countries.

France and other beneficiaries said it was too soon to discuss reforming EU farm policy because the budget, which runs until 2006, could accommodate the costs of enlargement.

In the trade-off, Chirac appeared to have won a respite until 2007, the end of his second term, but accepted that aid to French farms would slowly decline thereafter as payments to farmers in new member states are phased in.

Schroeder may claim to have spared German taxpayers billions of extra spending from 2007, but he appeared to have conceded that agricultural subsidies will remain high for another decade and that direct payments to farmers will survive.

Many diplomats reckoned France had got a better deal than Germany - if the two sides eventually agree what it was they had agreed.

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