The European cash cow

EVERY cow in the European Union receives a taxpayer subsidy of two euros a day – a stark statistic that underlines Tony Blair's determination for budget reform.

EVERY cow in the European Union receives a taxpayer subsidy of two euros a day – a stark statistic that underlines Tony Blair's determination for budget reform. EADT Political Editor Graham Dines previews the UK's presidency of Europe.

THE next six months will be the most testing period of Tony Blair's premiership.

Forget Iraq, the war on terror, and social reform at home. On July 1, he takes over the rotating presidency of the European Union for six months, having plunged the organisation into crisis by refusing to give up the UK's budget rebate unless farm subsidies are overhauled.

Europe is at a crossroads. The federalists' dream of ever closer political integration lies in tatters following the rejection by French and Dutch voters in referendums on the controversial European constitution.

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To turn attention away from his problems, President Chirac whipped up a storm demanding an end to Britain's rebate, only to find the normally Euro-compliant Tony Blair ready to stand up to the bullying.

The politics of Chirac's position are understandable, if you're French. France pockets 21% of all EU farm spending. The EU's Common Agriculture Policy has made France a leading exporter of food, representing 2.5 million jobs, 10% of the French labour market.

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Thanks to Margaret Thatcher, Britain has been getting an annual rebate since 1984 because it has relatively few farmers and claws back less in subsidies.

With feelings still running high over last weekend's summit bust-up, European Commission President Jose Manuel Barroso told Mr Blair yesterday he had to take the lead in finding a compromise.

"There is a risk of paralysis and it is urgent that we get an agreement on the budget," said Mr Barroso. "If our British friends think they are going to get all they want that is an error.

"I have to say that in the name of Europe. There must be no unilateral decisions. People have to make compromises. It is now up to the British presidency to find a consensus."

Finding that consensus rests more on France and its obdurate President. He'll face massive protests from the powerful and militant agriculture lobby across the Channel if he negotiates away its heavily subsidised way of life.

Mr Blair knows he can't cave into Chirac's demands. British voters are already deeply sceptical about the European Union and the faintest hint of appeasing the French could create a popular movement to leave the unloved organisation altogether.

Mr Blair's mood can be gauged by his statement in the Commons yesterday, when he insisted reform of the Common Agricultural Policy was not just in the interests of Europe, but also in the interests of the world's poorest countries, which needed to see an end to the wealthier nations' export subsidies in order for their economies to flourish.

And in an article for German tabloid newspaper Bild, he condemned the CAP for no longer meeting the needs of the European people.

Trying to drive a wedge between Chirac and German Chancellor Gerhard Schroeder, he wrote of the British government's support for a "social Europe which is adapted to today's world."

He condemned a system under which 40% of the EU's budget goes to agriculture. "We can't accept a budget that continues to spend seven times more on agriculture alone than on research and development, science technology, education and support for innovation combined,' he wrote.

"Spending four out of every 10 euros on the CAP – and on less than 5% of the population – simply isn't a budget which meets the needs and challenges of Europe and its people.

"We need a budget which concentrates on the future. A budget for jobs, not special interests. We need to invest in innovation and skills, not pay out two euros a day for every cow."

Germany is the largest net contributor to EU coffers, and he urged German voters to back an agenda that gives assistance to the poorest member-states, not propping up their rich neighbours.

He insisted that Britain "has always paid its fair share in Europe" and that it was ready to pay more. "But only if the money is concentrated in the right countries – the poor ones, not the rich – and concentrated on the right policies too.

"There is no reason for large transfers of money from countries like Germany and Britain to other rich countries to continue, as was proposed last week."

Using typical Blairite spin, he refused to call the budget a crisis but "an opportunity to be more ambitious for Europe" – a view unlikely to be shared in Paris and other European capitals.

"We can reconnect Europe with its people by addressing their needs. For the long-term good of Europe, I am determined that we succeed."

That determination takes him to Brussels today where he will be talking to Euro MPs, unveiling his EU agenda for the second half of 2005 which stresses growth and free trade to reverse Europe's sluggish economy.

There's a hard six months ahead. Margaret Thatcher famously handbagged her way to success – Tony Blair, who once had visions of becoming one of Europe's greatest leaders, has been marked out as just another member of the British awkward squad.

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