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European Union Targets Britain's Rebate

Britain faces some of the fiercest pressure in more than 20 years over its annual rebate from the European budget when EU ministers meet on Sunday to battle over how much they pay into and get out of the collective pot.

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Britain's Prime Minister Blair and Chancellor Brown face EU pressure

The ministers are meeting in Brussles over dinner on Sunday to voice their positions on the European Union's long-term budget before getting down to the hard bargaining at an official gathering on Monday.

But many of the big EU countries have already made their positions known, making statements in recent weeks to the effect that they want Britain's coveted annual rebate reconsidered.

The leaders of France, Germany and Poland stepped up the pressure on Britain with a joint call on Thursday for the rebate to be reconsidered and changed.

On top of that, the EU's current Luxembourg presidency proposed that the rebate be frozen and progressively reduced, seriously calling it into question for the first time since Britain's then-prime minister Margaret Thatcher secured it in 1984.

A British diplomat here said that the proposal was "utterly unacceptable", insisting that "the British rebate, as far as we are concerned, is fully justifiable".

Gordon Brown threatens veto to secure rebate

Meanwhile, the Chancellor of the Exchequer Gordon Brown said Sunday that Britain would not hesitate to use its veto to hold on to its two-decade-old rebate. "It's wholly justified. If we did not get the result we wanted we would not hesitate to use our veto," the finance minister told BBC television.

The British government rejects the EU proposals to freeze the annual budget rebate in 2007 and ultimately reduce it, arguing that it receives far less agricultural and regional development funding than its European counterparts.

"It is the right thing to do because we get so little of the CAP (Common Agricultural Policy) receipts, we get so little of the structural and cohesion funds receipts, that our rebate is wholly justified," Brown said.

"I was at a meeting last Saturday and made it absolutely clear that our rebate was wholly justified," Brown added, referring to the EU talks in Luxembourg. "Jack Straw is going (to the meeting in Brussels) and he will make that absolutely clear as well."

Straw to fight "unfairly high" demands

Straw said previously in March that his government was ready to use its veto to retain the long-cherished rebate -- worth some three billion pounds ($5.5 billion, 4.4 billion euros) a year.

The EU subsidies system has been modernized hugely since the rebate was first granted in 1984 -- but London insists Britain's contribution to Brussels would still be unfairly high without it.

"The reason is because France, for example, is getting high amounts of agricultural subsidies receipts. We don't," Brown added. "Which means that without the rebate, there would be a gap which would mean that we would be paying far more than France, far more than Italy, far more than other countries."

Rebate preventing breakthrough on EU budget

EU Finanzminister Treffen in Brüssel

The EU finance ministers have been wrangling over the budget for months

Other Brussels diplomats said that if it were not for the issue of Britain's rebate, the proposals by the Luxembourg presidency could probably break a deadlock over the overall EU budget.

"The presidency has done its work so well that technically it would not be very difficult to reach an agreement," a French diplomat said. "The real problem is the British rebate," he added. The French diplomat said that the problem was that successive British governments had lived on the rebate for 20 years and that the British were unlikely to budge. For the British, "there is the Crown and the check" he said.

EU wants budget sorted before Britain's presidency

Euro Skulptur vor der Europäischen Zentralbank in Frankfurt am Main, Kurs

Luxembourg, a veteran broker in EU affairs, wants an agreement to be struck at a summit in Brussles of EU leaders on June 16 and 17 because otherwise the budget likely will languish once Britain takes over the EU's rotating presidency for six months in July.

"If we want to get a political agreement, everybody around the table has to make sacrifices, but sacrifices that they can justify," a Luxembourg source said.

The battle lines over the overall EU's budget for the period from 2007 to 2013 are roughly drawn between the European Commission which wants to have as much money available as possible, and the six biggest net contributors -- Britain, France, Germany, Austria, Sweden and the Netherlands, which want to limit the budget.

Commission pushing for increased contributions

Luxembourg has proposed an overall budget for the EU in a range from 865 billion euros to 900 billion euros ($1.085 trillion - $1.129 trillion), representing the equivalent of 1.06 to 1.09 percent of gross national income.

The commission is angling for an EU budget of one trillion euros while the six main contributors have demanded that the budget be capped at 815 billion euros, or 1.0 percent of GNI.

While putting the British rebate into question, the Luxembourg proposals suggest that Germany, the Netherlands and Sweden -- the biggest contributors to the EU's budget -- should benefit from "specific measures".

Taking a leaf out of Margaret Thatcher's book, Luxembourg proposals said such measures were justified because "no member state should sustain a budgetary burden which is excessive in relation to its relative prosperity". That was the same grounds Thatcher originally based her argument for the rebate.

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