Tough decisions on funding cuts deferred

It's going to be one hell of a fight on farm payments, the Taoiseach, Mr Ahern, admitted at his final summit press conference…

It's going to be one hell of a fight on farm payments, the Taoiseach, Mr Ahern, admitted at his final summit press conference here. The issue has always been the focus of Irish opposition to elements of Agenda 2000, but the Vienna summit reinforces the challenge faced by Irish negotiators until the end of March when the package is supposed to be wrapped up.

Agenda 2000's compensation to beef and milk producers had been seen as inadequate, anyway, in Dublin. Now the rich member states are hoping to slash some £40 billion from the Commission's proposed farm budget and the Germans and British are still insisting that some of it should be re-nationalised. That means, potentially, a triple hit on Ireland.

France will support Ireland strongly on the issue of re-nationalising payments, but has made it clear that it supports the budget cuts which it believes can be brought about through cutting payments to larger farmers, who already benefit disproportionately.

Germany's Chancellor Gerhard Shroder told his final press conference that there was an obligation on the richer countries to support the poorer ones but that solidarity was a two-way street.

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And there is, indeed, a real understanding of Germany's political predicament as paymaster of 60 per cent of the EU's net contributions - with less sympathy for those like Austria, Sweden and Britain who were seen as trailing along on Bonn's coat tails.

German spokesmen insist they are not looking for "a pot of gold" out of the negotiations but a formula for contributions which will turn their rising burden around.

Portugal's Prime Minister, Mr Antonio Guttieres, will have raised eyebrows among his fellow leaders with his controversial assertion that he was not unduly worried about North-South wealth transfers in this round of structural funding because the single currency would inevitably lead to even more substantial transfers.

But it's still difficult to see how the gap between the Northern and Southern states (with Ireland an honorary southerner) will be bridged but there were persistent rumours here that the outline of a deal had been thrashed out between Spain and Germany.

Many diplomats surprised journalists with their confidence that there was a way round the problem.

Such confidence seems to be connected to the widely held assumption that even if they think they are ready to join the Union in 2003, the front-rank states of Central and Eastern Europe will be kept waiting until at least 2005 for accession.

That would allow £20 to £30 billion of the money supposedly ring-fenced for their accession to be freed to meet Southern spending aspirations or even Northern demands for money back.

Putting together such a compromise, whether explicit or implicit, is likely to provoke howls of rage in eastern Europe where the calls for a firm entry date are becoming more insistent, underlining their suspicions they are being sold down the river.

The summit was perhaps most surprising for its lack of rancour - sufficient, one Austrian correspondent said bitterly, despite the lack of progress on major issues, for the Austrians typically to describe it as a success.

The British in particular seem to have played a blinder in the week running up to the summit in defusing the controversy about corporate taxation.

It seems likely that their partners were given the message, and took the point, that the row was seriously threatening Britain's strategy of constructive engagement and its softly-softly campaign to persuade the public to sign up to the euro.

The final summit statement, although weaker than the mid-week Anglo-German declaration, was enough to placate the British press and certainly made the Irish happy.

"Co-operation in tax policy is not aiming at uniform tax rates and is not inconsistent with fair tax competition but is called for to reduce the continuing distortions in the single market, to prevent excessive losses of tax revenue or to get tax structures to develop in a more employment friendly way."

Even the controversial British rebate, extracted by a hand-bagging Mrs Thatcher in 1984, was not threatened in principle, Mr Blair was able to say, carefully dodging questions about its size.

"Despite what the British press told us," Mr Blair insisted, "that it was going to be the issue of the summit, I think only one leader raised the issue of the British rebate during the entire discussion."

With the usual summit habit of re-labelling old wine in new bottles, the Union's employment policy was further refined and then dressed up as an "employment pact", while the longstanding list of the Union's key priorities has become the "Vienna strategy". Coming your way next year too will be a major "Millennium declaration", set to redefine once and for all the relationship between the Union and its citizens. This correspondent just can't wait. The remarkable revitalisation of the duty-free campaign has left a bitter taste in the mouth, with many Commission officials unable to contain their furious contempt at what they see as the ability of a well-funded campaign to thwart the democratic will of a unanimity of member-states. But the stay of execution, for even just a few months, is still by no means certain as the Danes and the Commission are still holding out.