INFORMAL SUMMIT: BUDGET DEBATE TO MOVE UP EU LEADERS' AGENDA.

The main focus of the summit continues to be, on official level at least, the debate on how the EU should respond to the social and economic challenges of globalisation. In his letter, Mr Blair says that the task facing the EU is to "uphold European ideals in which we believe in the modern world" while addressing the "issues and challenges" citizens care about. The central question is "how to meet the competitive challenge and maintain the security of citizens in a world of unprecedented movement of goods, capital and people".

However, the subject of the 2007-13 budget has moved up the agenda as hopes have risen that a deal could be possible by the end of the UK Presidency. Until a couple of weeks ago, the expectation was that the dossier would pass to the Austrians to settle when they take over in the first half of 2006. Mr Blair says in his letter to leaders that, following widespread consultations, he believes there is "collective will" to get a deal in December. He also promises to make "every effort personally" to achieve one by then.

Despite the official programme of the summit (see below) EU officials say that the meeting could well kick off with a discussion on the budget. The British Prime Minister will state early on during the session his commitment to getting a deal by December as well as presenting a summary of the bilateral meetings his officials have had with all member states on the 2007-13 budget. Then he will call upon his colleagues to state their views on the main items for discussion. One official said that, "even if Blair wanted to", he would not be able to prevent the other leaders, especially those from the new member states, talking about the budget.

However, while they may address the five points outlined by Barroso in his paper (the Globalisation Adjustment Fund, "Lisbonisation" of the cohesion funds, further shift in farm support to rural development, a review clause on budget modernisation in 2009, and greater scrutiny rights for the Parliament on external relations spending), there cannot be detailed negotiation until the Presidency tables a new compromise which it is not expected to do before early November at the soonest. A UK Presidency official said there would be a "substantial debate" on the future financing at the November 7 meeting of EU Foreign Ministers but would not confirm if there would be a new formal proposal by then. There are suggestions that the UK might table an "issues paper" of its own in...