EUROPEAN UNION: BRUSSELS SUMMIT ON COURSE TO BREAK FARM-DEAL DEADLOCK?

German Chancellor Gerhard Schroder and French President Jacques Chirac emerged from their Brussels hotel on October 23 to announce their agreement only minutes before they drove off to the official opening of the Summit. A brief meeting had enabled them to agree a formula that defused one of the major tensions that had been underlying the Summit preparations: what would France demand as the price for cuts in its farm subsidies, and how far would Germany go in insisting on keeping EU spending down. As they outlined it, the agreement provides for:

* Phasing in direct payments to candidate countries from 25% in 2004 up to 100% in 2013.

* No change in the CAP before the end of 2006.

* Freezing farm spending between 2007 and 2013 in real terms at 2006 levels, divided among all Member States.

* Limiting expenditure on Structural Funds, and making savings in all domains.

The two leaders claimed their agreement had sprung "spontaneously" from their desire to promote enlargement. France and Germany both want enlargement to go ahead, and for Europe to develop in peace, said the Chancellor. And President Chirac said the construction of Europe had always been a common effort between the two countries since the EU was created, and would be even more important after enlargement. But President Chirac insisted that "we must also examine the problems of the compensation that some countries are entitled to, essentially the UK".

French Foreign Minister Dominique de Villepin later said the deal would mean an effort would have to be made by France as well as by others: "France will have less from the cake when it is frozen, and there are 25 Member States", he acknowledged. But, he went on, controlling expenditure after 2006 means all Member States will have to make efforts on Structural Funds, on agriculture, and he underlined, the British rebate.

The financial package.

The overall challenge for the Brussels Summit is to determine the total amount for the enlargement, the candidate countries' participation in the Common Agricultural Policy, including their share of the direct income support, and the total Cohesion and Structural Funds support for the candidate countries. As the meeting proceeded, there were early signs of agreement on some of these issues.

On direct payments, the provisionally agreed text reflected the Commission's original proposals, and set out the entitlement of new Member States to direct payments as 25% in 2004, 30% in 2005, 35% in 2006...