EU prepares to expand by six states

After crucial talks in Brussels yesterday, the European Commission looks set to call for Estonia and Slovenia to join Poland, Hungary, the Czech Republic and Cyprus in the next round of European Union expansion.

Following behind Nato, the European Union is starting to lay out its own strategy for enlargement. But it is likely to be 2002 before the EU sees its next wave of new members, taking it to 21 members from 15.

The proposal is expected to be formally presented next week when the Commission sets out a series of major reform plans, under the title "Agenda 2000", aimed at preparing the union for enlargement and clearing the way for the first accession negotiations.

The negotiations with new members now look certain to begin under the British presidency of the European Union, starting in January next year. The Foreign Office is already laying plans for an "enlargement conference" to be held in Britain, which will set the process running.

A total of 10 countries have applied for membership. In order to ease the disappointment of member states which are not invited to join in the first wave, the enlargement conference will be maintained as a rolling negotiation, with shadow negotiations established for likely late-comers, say British officials.

Attention has focused on which states will be selected as the front- runners for membership in the run-up to the Agenda 2000 launch. Cyprus has long been accepted as a good candidate, but the east and central Europeans have been vying to be in the first wave.

Although the Commission recommendations must be backed by the existing EU member states, at the next EU summit in Luxembourg, in December, its proposals will be highly influential. The Commission has based its call on detailed assessments of progress made by the would-be entrants in areas of economic and democratic reform.

In the run up to the Agenda 2000 launch, reports emerged of a serious split within the European Commission about which countries should be invited to join the first wave of negotiations.

Jacques Santer, the European Commission president, was reported to favour limiting the number to three, in view of the strains expansion would place on the EU's institutions. However, at yesterday's meeting of the 20-strong Commission, the majority view backed plans to start the talks with six.

Nato decided on Tuesday that it would admit the Czech republic, Poland and Hungary as new members. After a protracted conflict between the US and some of the European members - principally France and Italy - it decided not to put forward an invitation to Romania and Slovenia, though the door was left open to a second wave of entrants.

The EU invitation, if accepted, would confirm Romania's place in the second wave of European expansion. It would, however, boost Slovenia, the first country to emerge from the former Yugoslavia in 1991.

Nato and the EU have tried to keep their enlargement schedules roughly aligned. The move would mean that all current and future European Nato members would be in the EU (bar Norway and Iceland). Of the new EU members, only Slovenia has firm intentions of joining Nato.

One reason for keeping the enlargements on track is that members of the EU are allowed to join the Western European Union, the defence body with ties both the European Union and Nato.

But the decisions by both organisations mean that a substantial swathe of central and eastern Europe remains outside the charmed circle. In particular, Lithuania and Latvia, the other two Baltic republics, will be concerned that they are neither on track for Nato nor the EU. The Balkans, too, is still outside the main European institutions, despite French efforts to promote the cause of Romania.

Crisis budget for Germany

Bonn - Germany yesterday finalised an emergency budget aimed at qualifying for Economic and Monetary Union, writes Imre Karacs. But while the government was forced to acknowledge that it would have to borrow an additional 18bn German marks to keep the state machinery ticking over until the end of the year, officials insisted that the Maastricht targets for Emu remained in sight.

Economists are almost unanimous in their assessment that Germany's budget deficit will be more than 3 per cent this year, and that it will probably remain at that level in 1998. The cabinet is also due to approve today the budget for 1998, promising, as it did last year, a steady fall in outgoings and a reduction of government debt.

The new budgets make one concession to the real world: the pretence that unemployment will be halved by 2000 is gone.