Three week window to resolve EU budget

The EU will have a window of about three weeks to thrash out complicated and controversial arguments over how the Union will be funded from 2007-2013, Budgetary Commissioner Dalia Grybauskaite revealed.

Speaking at a meeting of the European Policy Centre on Thursday (24 February), Mrs Grybauskaite said, "I still think the best chance will start in April or May and we will have a window of about three weeks".

After this time, there will be a "different political environment", she added.

The Luxembourg Presidency hopes to seal an agreement on the so-called "financial perspectives" by the European Summit on 16-17 June.

Regional project take between 12 and 18 months to be realised, meaning that an agreement would ideally be reached by the middle of this year for the budget to be "active" at the start of the period in 2007.

Commission officials say they are waiting for the European Parliament and the member states to respond to their proposals for this budgetary period.

This should happen at the beginning of May, leaving little over a month to conclude what is expected to be an extremely hard negotiation.

A General Election in the UK, referendums on the Constitution in France and the Netherlands are also expected during this period.

Officials close to the negotiations say that the Luxembourg Presidency will come up with a "negotiating toolbox" to identify the most controversial areas, so that heads of state and government can begin to find a compromise.

Many areas of discord

But many areas of discord are likely. A group of six member states (the UK, Germany, France, the Netherlands, Austria and Sweden) want to cap EU spending at one percent of gross national income (GNI).

The Commission has insisted that "you cannot have more Europe with less money" and has proposed an average of 1.14 percent of GNI over the seven-year period.

In addition, there are likely to be spats over regional funds and the so-called British rebate.

The rebate - negotiated in 1984 by Margaret Thatcher - allows the UK to reclaim 4.6 billion euro per year from EU coffers.

Many member states believe this is no longer justified because the UK is economically stronger than it was when the rebate was agreed. However, the UK retorts that it still pays 2.5 times more than France, even with the rebate.

The budget must be agreed by unanimity. The last time it was negotiated, agreement was reached at 6am after acrimonious talks.

Links to stability pact?

Another reason for the hard bargaining starting in May is that leaders have a tough bargaining session ahead of them on the rules underpinning the euro - the Growth and Stability Pact.

The Luxembourg Presidency hopes to reach agreement on this by the end of March and then concentrate on the budget, creating the possibility of links between the two controversial subjects.

Mrs Grybauskaite firmly denied that there was a link, saying, "there is not supposed to be a link and in fact there is no link".

But reports in the German press have suggested that Berlin may soften its stance on the budget negotiations if it gets its own way on the Stability and Growth Pact - which they wish to see made more flexible.