Analysis: How 'President' Blair plans to capitalise on EU crisis

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The Independent Online

Until recently, Foreign Office officials were saying that Britain's six-month spell in the European Union's rotating presidency would be a workmanlike but deliberately low-key event.

There is now little prospect of that. The blood on the Brussels carpet from the acrimonious summit of EU leaders a week ago is still not dry, and Tony Blair is being blamed for spilling it by refusing to sign a deal on the EU budget. Whatever happens, the British presidency is unlikely to be dull.

A list of goals for the presidency is being rewritten to take account of the very different backdrop created by the summit and the "no" votes in France and the Netherlands on the proposed EU constitution. It is due to be unveiled in a White Paper next Thursday, a day before the presidency starts officially on 1 July.

As an eternal optimist, Mr Blair believes the crisis can yet be turned to Britain's and Europe's advantage. So does Jack Straw, the Foreign Secretary, who welcomes recent events - not because he wants the EU to collapse, but because he wants it to face reality.

Mr Blair has been encouraged by the positive reaction of commentators in France and Germany to his call for a "fundamental debate" over Europe's future direction and a rethink over the Common Agricultural Policy (CAP). "There is a growing recognition the debate is shifting our way," one Blair aide said yesterday. "The problems might concentrate minds."

If only it were that easy. The failure of the budget negotiations a week ago has left a nasty taste. Mr Blair's relations with Jacques Chirac and Gerhard Schröder are at an all-time low. The 10 new members who joined the EU last year, who should be natural allies, are furious that there was no budget deal and are wary of Mr Blair, who knows he has to work very hard to woo them.

What can Britain can achieve? The budget row is bound to overshadow the next six months. Britain will try to resolve it, offering to trade its widely-criticised £3bn-a-year rebate for a commitment to reform the CAP - probably through a review by 2008 or 2009. The problem is that the defenders of farm subsidies, led by but not confined to France, can sit tight and stick to the existing agreement, which does not expire until 2013.

Although the 10 new members are anxious for an early deal, a settlement may not be possible until after Austria takes over the EU hot seat next January. With the rebate central to any deal, Britain may not be best placed to secure one.

In theory, holding the presidency should allow Britain to set the EU's agenda. "Europe needs strong leadership and that's what we will offer," said a Blair ally. In practice, the country chairing EU meetings must be conciliatory and seek compromises. So it must be trusted as an honest broker. Mr Blair has work to do, as shown by the sceptical reaction by some MEPs yesterday to his declaration that he was a "passionate pro-European".

Britain's other main priority will be economic reform. It will offer Europe a stark "choice of directions" rehearsed by Peter Mandelson, Britain's European commissioner, in a speech in London last night. "One way we sink into protectionism and the defensiveness that helped defeat the constitutional treaty in the French and Dutch referendums. The other way, we press ahead with economic reforms," he said.

Mr Mandelson sought to reassure Britain's EU partners that the Blair Government favours a "social dimension" - albeit a different one to the Franco-German model. Instead of protecting existing jobs, it should create new ones, he said.

Britain will push a directive to liberalise the trade in services, which is opposed by France. It will be very keen to ensure that membership talks with Turkey start on schedule on 3 October, but could face opposition. Who is expressing doubts? France, of course.

Friend or foe?

IRELAND

Bertie Ahern.

Up to now seen as a staunch ally, but backs the CAP and described Blair's summit bust-up as embarrassing

GERMANY

Gerhard Schröder.

He is angry with Blair, who is openly boosting the opposition leader and likely next Chancellor, Angela Merkel

FRANCE

Jacques Chirac.

Relations bad for years - now open warfare

POLAND

Marek Belka.

Alarmed that Blair blocked spending deal destined to bring billions

CZECH REPUBLIC

Jiri Paroubek.

Not pleased with budget

SWEDEN

Göran Persson.

Stood with Blair in blocking a deal on the budget. Wants to reform CAP to focus on research and development.

NETHERLANDS

Jan Peter Balkenende.

Another Blair ally on the EU budget, he is trying to survive the domestic fallout from the constitution "no" vote.

SPAIN

Jose Luis Rodriguez Zapatero.

Fierce critic of the Iraq war, he is hardly a reliable ally for Blair

LUXEMBOURG

Jean-Claude Juncker.

Always careful not to fall out with Blair, but he was so angry with the PM that the final session of the summit had to be delayed

BELGIUM

Guy Verhofstadt.

Furious with Blair for blocking him as European Commission president.

ITALY

Silvio Berlusconi.

Even Berlusconi - Blair's best friend in the EU - has appealed for the British Prime Minister to back down over the rebate.

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