EU: European leaders look set to agree today on how to pay for enlargement of the European Union after a surprise deal between France and Germany over the future of farm subsidies.
The deal between the French president, Mr Jacques Chirac and Germany's chancellor, Mr Gerhard Schröder came only an hour before a two-day summit began in Brussels.
The two leaders agreed that direct payments to farmers in central and eastern Europe should be phased from 2004 and that there should be no change in EU farm policy until 2006.
From 2007 to 2013, the total budget for direct payments would be frozen at almost €46 billion but index-linked to inflation.
The Danish prime minister, Mr Anders Fogh Rasmussen, whose country holds the EU presidency, welcomed the Franco-German agreement, which should make it easier to reach an overall deal on how to finance enlargement.
"I feel confident that at the end of the day all EU leaders will realise that we are facing a historic moment, we're going to make a historic decision, and this should not be overshadowed by a detailed discussion on budget and agriculture," he said.
Irish officials said last night that they were studying the deal to assess how it will affect Irish farmers. But the Government is expected to welcome the fact that the deal effectively postpones any review of the Common Agricultural Policy (CAP) until 2006.
"It's a positive move but we have to wait until the final outcome and it's still possible that other member-states could object," a Government source said.
Commission officials gave a cautious welcome to the Franco-German deal, which took the two leaders just 90 minutes to agree in a Brussels hotel. The Commission fears however that postponing a review of farm policy could create problems for the European Union at the World Trade Organisation (WTO).
The EU agreed at a WTO meeting in the Qatari capital of Doha last year to reduce farm subsidies and give Third World farmers a better deal on tariffs.
Under the Franco-German deal, the total budget for direct payments would be frozen in 2007 but payments to farmers in new EU member-states would rise steadily until 2013.
Commission experts believe, however, that any reduction in payments to farmers in existing member-states would be insignificant.
The issue of farm subsidies has been regarded as the most difficult issue at the summit but the EU is also divided over other issues relating to the financing of enlargement, including the level of structural funds.