Germany raised the prospect on Monday that the European Union may fail to clinch a deal on its long-term budget at a summit this week, deepening the crisis triggered by two "No" votes to the EU constitution. With time running out before a June 16-17 summit intended to give the floundering bloc some political direction, its leaders appeared equally at a loss over how to deal with the stinging rejections of the charter by French and Dutch voters.
Franco-British squabbling over their EU dues dominated budget talks among foreign ministers late on Sunday, prompting some to lower their expectations of an imminent breakthrough.
"It's up to the (EU) presidency to decide how realistic an attempt to reach agreement is at this stage, or whether we stick with an interim result that the British presidency can take forward," German Foreign Minister Joschka Fischer told reporters before a meeting in Luxembourg.
Britain is due to take over the rotating EU presidency from Luxembourg for six months from July 1.
Yet few hold out much hope of agreement on the 2007-2013 budget during the British presidency because London is seen as alone in insisting it keep the multi-billion-euro rebate from EU coffers won by ex-Prime Minister Margaret Thatcher in 1984.
Prime Minister Tony Blair insisted during a trip to Russia that he would discuss the rebate only as part of a broader debate on EU financing.
"We can't discuss the British rebate unless we discuss the whole of the financing of the EU, including that 40 percent of the budget goes on agriculture which employs only 5 percent of the people," he said after talks with President Vladimir Putin.
"I am going to be, as is my way, diplomatic but firm," added Blair, who from Moscow will travel to Berlin for a meeting with German Chancellor Gerhard Schroeder, and from there to Paris for a showdown on Tuesday with French President Jacques Chirac.
Britain won its rebate when it was one of the poorer EU countries and got little back from Brussels in farm subsidies which at the time made up 75 percent of the EU budget. Britain is richer now but says that even with the rebate its net contribution to the EU is much greater than that of France.
Paris hit back at British efforts to re-open talks on farm spending, insisting the British rebate was the sticking point and that Britain would get the blame if there was no accord on the budget, worth 106.3 billion euros ($130 billion) this year.
"We should not add a financial crisis to a political and institutional crisis, so we need a compromise and I tell my counterpart Jack Straw ... we cannot not find a compromise," Foreign Minister Philippe Douste-Blazy told France's RTL radio.
Austrian Foreign Minister Ursula Plassnik said Straw won no support at the meeting for his call to re-examine farm spending. "He remained isolated in this position," she told reporters.
Luxembourg, the current EU president, is seeking a compromise between the bloc's executive Commission, which wants member states to contribute more to fund the costs of enlargement, and a group of six major net payers - including Britain - which are demanding big cuts in planned expenditure.
One front in the battle was eliminated, when Poland said it had given up the fight for an increase in the EU budget, saying it would get virtually no benefit from higher overall spending.
Differences remained on how to extricate the bloc from the constitutional minefield set by French and Dutch voters.
Straw told reporters in Luxembourg there were expectations that Chirac would tell the summit how he proposed to proceed with ratification of the charter after the "No" vote in France to the treaty he personally backed.
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