Hard bargaining ahead on new deal

The Irish presidency of the EU yesterday said it was "closing in" on a deal over a draft constitution for the Union, despite a raft of complaints from countries over plans to break the deadlock.

Shocked by the reaction of voters in Sunday's European elections, which were marked by the rise of eurosceptics and a low turn-out, Europe's leaders are under pressure to strike a deal today. But as negotiations began last night, none seemed willing to abandon their opening positions without, at least, appearing to fight hard for more concessions.

Bertie Ahern, the Prime Minister of Ireland, which holds the EU presidency, told a press conference: "Much of the discussion today focused on institutional matters - voting, the Commission, Parliament. As you'd expect there are different points of view, but I think we're closing in on an agreement.

"If we complete this it will be European history," Mr Ahern added, after the first session of a summit which is scheduled to finish tonight.

Such cautious optimism was echoed by the French President, Jacques Chirac, who said: "We have reached a stage where an agreement is quite possible."

Nevertheless the central, unresolved row remains focused on voting weights, the issue which caused the last negotiations to collapse in December when Spain and Poland blocked change to a system under which decisions would need the backing of half of the nations and 60 per cent of the population.

Ireland has offered concessions to the Spaniards and Poles by suggesting an increase in the thresholds to 55 per cent and 65 per cent respectively. They also suggest changing the definition of abstentions to make it easier to get measures through.

Both nations were still calling for the population threshold to rise to two-thirds, or 66.6 per cent, to make it even easier for them to block measures they dislike. But that angered several countries which say that the concessions already offered by the Irish could paralyse decision making.

Wolfgang Schüssel, the Chancellor of Austria, said: "For many countries a 10 per cent difference between the two thresholds is too much. They are in favour of parity, or a 5 per cent difference at the most."

Mr Schüssel added that as many as 10 countries remained opposed to the Irish presidency's plan to slim the size of the Commission to 18 by 2014. Small countries, such as Finland and Slovenia, fear for their influence if they lose the right to their own representative in Brussels.

There was continuing discord over the policing of rules governing the eurozone countries. The Irish have put forward a proposal under which the European Commission would determine when a country breaches the deficit ceiling of 3 per cent of gross domestic product. Member states would then decide what steps that country should take to cut its budget shortfall.

That move, welcomed by Germany and Italy, has provoked a fierce rift with the Dutch, who were furious that Berlin and Paris flouted the rules on budget deficits laid down for euro membership.

The Irish plan was hailed as a "good compromise proposal" by the Italian Foreign Minister, Franco Frattini. Yesterday's opening skirmishes were described by one European Union diplomat as "a typical restatement of positions at the start of a negotiation".

And Belgium's Foreign Minister, Louis Michel, spoke for many of his colleagues when he said: "If we don't succeed a second time, it would be very embarrassing."

THE KEY ISSUES

TAX AND SOCIAL SECURITY

Proposals

Latest draft of constitution by Ireland, the current president, which axes the previous plan to allow majority voting in limited areas such as combating tax fraud. It also suggests an "emergency brake" on social security - which would allow any member state to refer a decision on that issue to the European Council if it is unhappy with it.

Blair's Position

Tax is a key "red line" or no-go area for Britain. Gordon Brown is implacably opposed to any EU role in tax affairs, believing it would set a dangerous predecent. Tony Blair appears ready to accept the proposed compromise on social security, arguing it safeguards a British veto - a point disputed by Eurosceptics.

Likely Summit Outcome

France, Germany and Belgium opposed the concessions to Britain over tax when the summit opened. But Blair is determined to safeguard his "red lines'' at all costs. Other countries know this and will probably try to extract a price from the UK in other areas, leading to compromise likely to be accepted by all sides today.

VOTING POWER

Proposals

The latest draft by the Irish aims to break the deadlock that stopped the first attempt to approve the constitution in December. It would create a "double majority" system in which legislation would need backing from 55 per cent of states representing 65 per cent of the EU's population.

Blair's Position

For once, Britain is not at the centre of the row. Blair has been able to stand on the sidelines because as one of the EU's biggest nations Britain is not so sensitive to changes in the voting system and remains confident in its power to block laws it dislikes.

Likely Summit Outcome

The most likely deal-breaker, with vital national interests and pride at stake. Yesterday Poland and Spain stuck to their guns and demanded further concessions. But the summit's mood was conciliatory. No country really wants to be blamed for another summit failure. Deal probable.

EU CHARTER

Proposals

The constitution includes a Charter of Fundamental Rights, once described by British ministers as having no more legal force "than The Beano", but a red rag to Eurosceptics. Ireland has softened its impact by proposing a new clause, requested by the UK, which Britain says will guarantee the charter will not create new legal obligations.

Blair's Position

The PM is anxious to prevent the charter diluting Britain's industrial relations laws, introduced to give workers greater rights. He has been lobbied by industrialists, worried that the charter may be used by workers taking cases to the European Court of Justice. Mr Blair welcomed the new version produced by Ireland yesterday.

Likely Summit Outcome

In the summit's opening session, France, Germany and Finland argued that the charter had been watered down too much to appease Britain and called for it to be strengthened. After getting this off their chests, they may accept the Irish compromise when the discussion resumes today. It is not likely to be a major sticking point.

EUROPEAN COMMISSION

Proposals

To reduce the number of members of the Brussels-based European Commission from one per member state (of which there are currently 25) to 18 by 2014. Supporters of the plan argue that this is vital if the Commission is not to expand to such an extent that it becomes too unwieldy to work.

Blair's Position

The Prime Minister is ready to accept a slimmed down Commission in an attempt to allow it to function more effectively. Britain is one of the EU's big member states which used to send two commissioners to Brussels but which will, as of this year, have only one representative.

Likely Summit Outcome

Small countries, including Finland, Hungary and Latvia, likely to insist on a permanent representation on the Commission in perpetuity. But France is set against that and is determined to get a leaner Commission. The delay of any change to 2014 is likely to be enough for the small nations.

GOD

Proposals

The charter skirts any specific reference to God or Christian heritage for fear of alienating other religions, and because some countries have a strong secular tradition. Italy, Poland - and the Pope - want a reference to God or to Christianity to emphasise Europe's Christian heritage. But the idea is fiercely opposed by France and Belgium.

Blair's Position

Not pressing for a reference to God in the constitution. The government is highly sensitive to the risk of alienating other religious groups and insists that any reference must extend beyond Christianity to embrace other religions. He is also wary of anything that might deter Turkey's prospects of joining.

Likely Summit Outcome

"We will fight like lions," said Marek Belka, the Polish Prime Minister who is under acute pressure to deliver; the Polish constitution already has such a reference. But France is determined to resist. The likely concession would be a declaration attached to the constitution for countries that want it but without any legal force.