EU SUMMIT: Beef kept off the agenda at Europe's frosty talks

NEVER BILLED as a summit of harmony, the last meeting of the century for the European Union's heads of government got off to an acrimonious start last night, overshadowed by rows on British beef exports and tax, and by the humanitarian and diplomatic crisis caused by Russia's bombardment of Chechnya.

France's unexpected decision not to lift the embargo on British beef set the scene for a difficult encounter between Tony Blair and his French counterpart, Lionel Jospin, today. Mr Blair has denounced the French actions as completely and totally wrong".

But before that meeting - in whatever form it takes - Europe's finance ministers gathered in a snow-covered Helskini last night to tackle another contentious issue for Britain; the plan for an EU-wide savings tax.

Dominating the broader perspective is the crisis in Chechnya. After demands from France for a change to the agenda, the Finnish presidency brought forward its planned discussion on Chechnya to lunchtime today. And Turkey's bid for membership of the EU presents another unresolved and thorny issue.

Officially the summit is to launch Europe's new defence capability - including a rapid-reaction force of 40-60,000 troops - speed up enlargement and set the parameters for institutional change.

Most eyes, however, were on Mr Blair and how he would confront the beef issue. Although no time would have been good for the announcement of France's decision not to lift the ban this was, as one official put it, "particularly bad" on the eve of a European Council.

Despite calls in Britain to put the matter on the formal summit agenda, Finland had received no formal request last night and did not expect one.

"There will be discussions in the margins between France, Britain, other member states and the European Commission," said Antti Satuli, Finland's ambassador to Brussels.

For Mr Blair, the French decision represents a considerable blow to his European strategy. Having carefully played by the rules and agreed to exhaustive efforts to achieve a negotiated settlement, Wednesday's rejection was a sizeable setback.

Before leaving London the Prime Minister spoke by telephone to Romano Prodi, President of the European Commission, and Brussels is backing the UK fully.

The EU at least provides a mechanism for recourse but that is unlikely to satisfy Eurosceptic opinion in Britain. Officials are now bracing themselves for a wave of criticism about the operations of the Court of Justice, which could take between 14 months and two years to resolve the case.

Ironically the beef crisis may, however, help Mr Blair through this two-day summit. With the UK at the centre of a bitter row over the proposed tax on savings, the Prime Minister was set to appear in Helsinki in the role of villain. Instead he emerges as the victim of this drama.

Ironically, the French Finance Minister raised his head above the parapet to call for the UK to fall into line on the tax issue. In the current climate that will cut little ice, and any repeat of Gerhard Schroder's criticism of Mr Blair over tax is likely to pale into insignificance alongside Anglo-French invective on beef. As one official put it: "Blair's off the hook".

Looming over the summit is the EU's dilemma over how to deal with Finland's troublesome neighbour, Russia, and its aggression in Chechnya.

Calls for the severing of financial-aid programmes, or for co-ordinated diplomatic protests, were being played down by Finland, which has years of experience of dealing with Moscow. It might, said one of the country's most senior diplomats, "be too early to talk about financial sanctions". Other nations, including the UK and France will be pushing hard to toughen that stance and send a clear political message to Moscow.

But the leaders also have a difficult negotiation on their hands today over Turkey's demand to be given candidate status. If Europe says "no", it will mean the end of Turkey's brave new friendship with Greece, forged in the despair of this year's catastrophic earthquakes. It will be a death sentence for the Kurdish rebel leader Abdullah Ocalan, and the end of Kurdish hopes for better rights. And it will probably be the end of hopes for a new settlement on Cyprus.

The earthquake that killed 17,000 in August gave Turkey a chance at Helsinki, prompting sympathy from across Europe, and, crucially, giving Athens and Ankara the chance to patch up differences. But now Greece is bargaining, seeking concessions on Cyprus and the Aegean islands.

All of which will could mean a summit disappointment for the Finnish hosts.

With scheduled announcements on Europe's new defence capability, the next phase of enlargement and of institutional change, Finland had hoped for some positive headlines to round off its first presidency and the last EU summit of the century. It still has its work cut out.

THE ISSUES

Reuniting Europe

The summit will lay the foundations for expansion of the EU, from 15 to 26 members, with Latvia, Slovakia, Romania, Bulgaria and Lithuania joining Slovenia, Estonia, Poland, Hungary, the Czech Republic and Cyprus in entry talks. But there will be the tricky question of whether to include Turkey on the waiting list.

Defence

The summit will decide to give the EU for the first time its own defence capability - independent of Nato and the United States. The Chechen crisis has highlighted the virtual powerlessness of the EU to force a nuclear superpower to back down.

Internal Reform

Leaders are weighing the scope and timing of a new round of negotiations on far-reaching constitutional changes to prepare for 12 new members. Changes include the removal of member states' right to veto majority decisions.

Tax

Barring an 11th-hour compromise by finance ministers the leaders may have to tackle contentious proposals for an EU-wide savings tax. Britain and Luxembourg are holding out, fearing it will harm their national interests.

Katherine Butler