FINANCIAL PERSPECTIVE: DALIA GRYBAUSKAITE WARNS OF PARALYSIS IF NO AGREEMENT IS REACHED BY JUNE.

"We cannot allow any delay", Dalia Grybauskaite insisted, hinting at the Luxembourg Presidency's aim to wrap up the talks on the medium-term EU budget in June. She recalled that this financial framework is "crucial to the EU's future" and that in the absence of a rapid agreement, whole areas of EU policy may no longer be guaranteed once the current framework expires at the end of 2006. She recalled that the Commission needs a minimum of eight to ten months to prepare the legal bases for programme funding and that any delay in negotiations would therefore jeopardise EU funding from 2007. She explained that only about 40% of the budget corresponding to direct payments to farmers in the context of the Common Agricultural Policy (CAP) and administrative spending would be guaranteed. By contrast, she believes funding for EU priorities like research, rural development, competitiveness and cohesion policy might be threatened.

Negotiations not deadlocked.

Mrs Grybauskaite expressed guarded optimism regarding the outcome of the on-going negotiations. As to the group of six countries that demanded a cap on the EU budget at 1% of GNI, the Commissioner explained that their positions have evolved "spectacularly" in different directions since the autumn and that it is not longer appropriate to speak of "groups" but rather negotiations involving all 25 member states. Moreover, regarding the 1% ceiling, she explained that no state has yet formally tabled a figure and that the negotiations "are not deadlocked". She expressed confidence that an agreement will be found since "it is in the interests of all 25 member states". The Commission is anticipating a compromise result some where between its own proposals and figures tabled by the Council. She refuted suggestions that the Commission will discuss a lowering of its won proposed figure.

Turning to the British rebate, the Commissioner reaffirmed the position adopted by the Commission in July 2004 questioning the rebate and rejected suggestions that the issue might be "frozen" until 2013. Mrs Grybauskaite is determined inflexibility should not undermine the on-going discussions.

Presidency rules out partial agreement.

Speaking the same day at a conference staged by the Committee of the Regions and the European Parliament's Regional Development Committee, Luxembourg's junior Foreign Minister Nicolas Schmit was just as firm on the issue of Britain's rebate, insisting it will form part of the overall agreement...