BRITAIN: British prime minister Tony Blair is heading for a showdown with French president Jacques Chirac in Paris today after a meeting last night in Berlin with Chancellor Schröder failed to break the EU budget deadlock.
Mr Blair said the French and Dutch rejection of the European constitution was a demand for EU leaders to re-evaluate Europe's "big economic challenges" to "recover support for the European project".
In Berlin yesterday, Mr Blair said he was prepared to discuss anything with anyone on the basis that the leaders were reconnecting the people of Europe with the institutions of Europe.
He is defending Britain's EU budget rebate, agreed in 1984 and worth €5.2 billion last year, despite pressure from Berlin and Paris to make concessions.
Mr Blair has said he is only prepared to do this as part of an overall review of EU spending, in particular the 40 per cent of the EU budget spent on the common agricultural policy (CAP).
Mr Chirac has ruled out renegotiating the current agricultural deal, which runs out in 2013.
"There must be fundamental changes, in particular to the CAP and the amount of the budget that it takes up each year," said Mr Blair earlier in Moscow.
"You have to ask the question, in the early 21st century, is a budget formulated in this way the answer to the problem of Europe today. I don't think it is."
He said all EU leaders were anxious for a fair deal but they "have to look at fairness in respect of the whole way that Europe is financed".
Mr Schröder reiterated the German position, agreed with Paris, that the agricultural subsidies for 2007-2013 were unanimously agreed in 2002 and were not up for renegotiation.
"The Germans have a habit of sticking to agreements concluded and contracts signed," said Mr Schröder.
"We both have interest in a fair compromise. I hope that there is a result [ at the summit]. Germany is prepared to make a contribution but we expect all countries to give up national egotism of any nature.
"We are prepared to move in the interest of Europe. We expect the same ability to move from all others," the chancellor said.
The two men held talks over dinner in the chancellery in Berlin yesterday evening. After arriving in Berlin from Moscow, Mr Blair had a meeting with Angela Merkel, leader of the opposition Christian Democrats.
German foreign minister Joschka Fischer said earlier in Luxembourg that an "interim" budget deal was likely at the upcoming summit with a final plan agreed later.
His British counterpart, Jack Straw, reiterated that Britain was prepared to use its veto to defend its budget rebate.
German government spokesman Bela Anda said Germany was "optimistic, but not overly optimistic" about a deal.