EUROPEAN COUNCIL: SUMMIT ENDS IN FAILURE AS BUDGET TALKS COLLAPSE.

UK Prime Minister Tony Blair led opposition to the deal, insisting that the EU committed itself to a thorough review of its spending priorities before it could make concessions over its euro 4.6 billion a year budget rebate. A British official explained that: "The problem is the imbalance of the budget: 40% of the budget goes to meet the needs of 5% of the population and 2% of European jobs. It needs to more accurately reflect the needs of Europe as it faces the challenges of the 21st Century and the challenges of globalisation." Mr Blair had support of Sweden's Prime Minister Goran Persson who called for a higher share of the EU budget to be spent on research and development and a review of spending priorities in general. Mr Persson had made it clear from the start of negotiations on the budget that it was too early to strike a deal, suggesting EU leaders waited another year.

Dutch Prime Minister Jan Peter Balkende also blocked the final compromise because he was not satisfied with the reduction being offered in his country's net contribution to the budget which, he said, he wanted halved to euro 1.5 billion. Spain and Finland also opposed the final package, criticising the offers they were getting on regional funding.

Clash of two philosophies.

Speaking after the meeting broke up, Mr Juncker attacked the attitude of some member states in the negotiations, saying that some of them were simply not interested in getting a deal, implying the UK but without mentioning Tony Blair by name. He blamed the failure of the summit on a clash of two philosophies on Europe: those who believed in a Europe as a "big market" or a free-trade area; and those who believed in a politically-integrated Union able to tackle real challenges.

He pointed out that he had tried to address the concerns of some member states, highlighting the fact that in terms of reform of future spending priorities, he had proposed a review of all aspects of the budget in 2009. Mr Juncker said he was "ashamed" when leaders of the new member states had offered to give up some of their entitlements in order to get a deal. Poland's Marek Belka, for example, offered in the final round of discussions to give up euro 1.5 billion in aid to help reach an agreement and his offered was followed by similar proposals by the Czech and Hungarian Prime Ministers.

French President Jacques Chirac was even clearer about who he thought was to blame. At his post-summit press conference, he said "I deplore the fact that the UK is not prepared to pay its fair share of the cost of enlargement". He cautioned that the UK Presidency would "not get off to an impressive start". Mr Chirac praised the new member states who...