WATSON SEES THE EUROPEAN UNION AT A WATERSHED.

It is ironic that Britain, traditionally the black sheep of the EU family, is to take the helm of the Union ship just as it sails into stormy waters. Yet Britain has often been known for asking the hard questions, even at the cost of making enemies. When the Dutch archbishop hosted the UK admiral and French corsaire for supper two hundred years ago in an attempt to make peace between them, his question: oQuest-ce quil vous differencie?o earned the response from his British guest oNous nous battons pour la gloire tandis queux, ils se battent pour largent!o - and the subsequent French riposte oMonseigneur, chacun se bat pour ce quil lui manqueo. The recent skirmishes over future financing and the UK rebate have raised expectations of another bare-knuckle fight at this week's summit.

When French and Dutch voters slapped European integration in the face, some realised straightaway that the Union will never be the same again. The UK government put its referendum on hold, recognising that few will vote for a treaty whose future is uncertain. Though attacked for indecent haste, Britain was voicing what was rapidly becoming political reality, as opinion polls from Copenhagen to Lisbon confirm. Unless Chirac and Balkenende admit theyre to blame for this mess, and promise to try again, heads of state and government can do little more than put the treaty on ice. This would be a pity, since the EU's political arrangements are more important to our people than its financial arrangements.

Discussion of the UKs budgetary correction mechanism can logically be linked with a wider review of EU budgetary priorities. The UK is not the only country with too great a financial solidarity towards others and it is patently absurd for 42% of the EU budget to support the 5% of its people that its farmers constitute. What has the Council of Ministers been doing for the past 18 months? The Commission's first proposal for restructuring budgetary priorities appeared in February 2004. Parliament gave its response last month after a long and open public debate. A delay at Council approval of the financial perspectives will impede the introduction of operational programmes from...