Germany and Finland to swap EU chairs

Germany and Finland are to swap their presidencies of the European Union in 2006 and 2007, which could help Berlin's battle to cut its huge contributions to EU coffers.

Diplomats say such a decision would make sense because, under the original timetable, both countries were expected to face national elections during their presidencies, which one EU official described as a "recipe for paralysis".

There is a risk of lack of continuity if a government changes while a country holds the EU presidency. And countries chairing meetings are expected to be neutral and rein in national interests during negotiations. This can be difficult when governments face elections.

Instead of holding the presidency in the later half of 2006 when crucial negotiations on EU finances will be held, the Germans will now be in the chair during the first six months of the following year.

That means that, when the EU's next budget is decided, Germany will not be in the difficult position of having to try to broker the compromise while at the same time pushing to get the best possible deal for itself.

German officials remember clearly the experience of holding the presidency during the last budget-fixing summit in Berlin in 1999. At that time the recently elected Chancellor, Gerhard Schröder, had demanded a cut in payments from Berlin, which is the EU's biggest net contributor.

But because the onus was on the German presidency to get a deal, Mr Schröder was forced to compromise, giving in to French demands to water down reforms of the Common Agricultural Policy.

One EU diplomat said yesterday: "The decision was based on the timetable of national elections. But it is more difficult to argue your national interest if you are in the chair, particularly when you are talking about the budget."

Others were more doubtful about the significance of the move, pointing out that the whole system of EU presidencies is up for review, and could have changed by 2006 by which time new member states are due to have joined the EU.

Until 1995 the order of the rotating presidency was decided alphabetically. Since then a system has been operating designed to ensure a sequence which alternates large and small member states.

Portugal delayed its presidency because its term was due to fall just as the country joined the EU.