Former communists rethink UK alliance

Britain's most dependable European Union allies - the former communist countries of Eastern Europe - are reassessing their alliance with Prime Minister Tony Blair after he blocked an EU budget due to bring them billions of euros to revive their economies.

Britain was one of the strongest supporters of last year's EU expansion, and its free-market instincts and transatlantic outlook made the UK a natural ally for eight East European nations that joined the bloc last May.

But so desperate was Poland to get an agreement on the funding package for 2007-13 that its Prime Minister, Marek Belka, even offered to sacrifice some receipts to help clinch a deal.

Yesterday Poland's European Affairs Minister, Jaroslaw Pietras, said there was now "a risk the funds Poland gets will be less than expected", adding a thinly veiled criticism of the UK.

"This risk," he said, "has been made greater by the fact that the large, rich member countries weren't prepared to budge on the amount they want to pay into the EU budget."

Hungary's European Affairs Minister, Etele Barath, warned that a blockage over spending plans for 2007-13 would lead to "extremely serious consequences".

The budget is crucial to the new countries because 2007 is the point at which they step up from a transitional phase of membership to receiving a massive influx of cash. Full structural-fund receipts are expected to be worth around 4 per cent of gross national income after 2007 and Poland alone could receive more than 80 billion ($136 billion).

Blair said that the EU's spending on agricultural subsidies "does not make sense" and called for an overhaul of the bloc's budget.

In a statement to the House of Commons, he said the EU faced an "immense global competitive challenge" and insisted it must spend more money on science, technology and education, rather than farming subsidies.

Blair said Luxembourg's attempts to forge agreement on the EU budget for 2007-2013 had failed. Luxembourg currently holds the six-month presidency of the bloc and hands over to Britain on July 1.

"The terms of the review were expressed in a language so vague as to be meaningless," said Blair. "It was not the right deal for Britain. It was not the right deal for Europe."

Britain's contributions to the EU budget would rise once Europe's finances were reformed on a sensible basis. Britain was ready to pay a "fair share" of the costs of enlarging the EU, he said.

Referring to suggestions that the failure to reach a deal had deepened Europe's crisis, Blair said the EU's credibility demanded "not the usual cobbled-together compromise ... but a deal which recognises the nature of the crisis".

In what was seen as a reference to French President Jacques Chirac and Gerhard Schroeder, the German Chancellor, who had criticised Blair for refusing to give up Britain's budget rebate, the Prime Minister said: "The crisis is not about the failure of Europe's leaders to reach agreement with each other.

"The crisis is about the failure of Europe's leaders to reach agreement with the people of Europe about the issues that concern them."

Blair said he had not sought to block any change to the rebate, or to rule out discussion or disown Britain's responsibility to pay for the EU's enlargement.

He disclosed that, during the final stages of the Brussels summit, he proposed a fundamental review of the EU budget which would report in 2008 or 2009 - midway through the next financial period. Such a review is now likely to be pressed for by Blair when he assumes the rotating EU presidency next month.

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