Irish hopes rise of reprieve in Objective 1 funding cuts

EU leaders last night sent back to officials the whole package of farm reforms and compromise proposals to deal with the farm budget overrun. They are expected to report to the summit again this morning.

The discussion on how the full EU budget should be paid, and on the structural and cohesion funds dossiers, was expected to continue over dinner. However, the EU leaders cancelled the dinner and continued negotiating into the early hours of this morning.

The rearrangement of yesterday's agenda to deal with the Commission succession and the Kosovo situation has inhibited the German Presidency in its ability to prepare final compromise papers for the morning.

There were some signs of hope for the Irish on one of the dossiers of particular concern, the funding of regions in transition from Objective 1, like the east and south of the State. Portuguese sources say the Commission is preparing a special package for the Lisbon region which is facing massive cuts in its structural funds eligibility.

The sources say they believe that a package similar to that proposed by the Commission and regarded by the Irish as their bottom line is under consideration. That would allow a delay of two years before the start of the phasing out of Objective 1-level funds.

Despite the failure of leaders to engage with the general funding debate, there was still much sabre-rattling about national positions, most notably the "sacrosanct" British rebate on its contributions. A spokesman for the British Prime Minister insisted that "we fully appreciate why the Germans feel the unfairness [of their budget contribution] but it shouldn't be addressed by creating fresh unfairness for the UK".

German Presidency officials responded that 14 out of 15 member-states agreed the rebate had outlived its purpose.

Meanwhile, in the streets, several thousand German farmers were marching against cuts in the CAP. Speaking to the rally, the president of the Irish Farmers' Association, Mr Tom Parlon, warned that the suggested cuts in direct aid payments to farmers through French degressivity proposals would cost Irish farmers £225 million over the next six years if applied.

He said any move to reopen the farm agreement would be catastrophic for Irish grain-growers in particular.