Barroso Warns of Crisis if EU Fails to Reach Budget Deal

The head of the European Union's executive body says the 25-nation bloc could be plunged into crisis if it fails to reach a deal at a summit this week on its long-term budget. After rejections by French and Dutch voters of the union's constitution, most EU leaders saw a budget deal as a sign that they could still agree on something.

The EU had hoped that the two-day summit beginning Thursday would be an opportunity to spur new confidence in European integration after the bloc was plunged into turmoil by the referendums in France and the Netherlands.

Luxembourg Prime Minister Jean-Claude Juncker, who holds the EU's rotating presidency, has been trying his best to broker a deal on the union's future financing in spite of conflicting demands by Britain and France. But he now acknowledges that such an accord is probably impossible.

Despite the insistence of its 24 partners, Britain refuses to give up a $5.5 billion annual rebate from EU coffers that it won two decades ago, when it was less well-off than it is today.

British Prime Minister Tony Blair says he will consider freezing the rebate, which increases every year, but only if the EU reforms its subsidies to the bloc's farmers. That program consumes more than 40 percent of the EU budget, and 25 percent of those outlays goes to French farmers.

France refuses to consider any change in the farm subsidy program, so the budget negotiations are deadlocked.

Jose Manuel Durao Barroso, the head of the European Commission, says the EU is now at a turning point and cannot afford to fail in reaching a budget deal after the French and Dutch rejections of the constitution. He told reporters Wednesday that, without such a deal, mistrust of the union among its citizens is likely to grow.

He says that the results of the French and Dutch referendums have plunged the EU into uncertainty. The EU, he says, has to overcome this uncertainty and give back confidence to its citizens. If it does not, he warns, the EU will sink into permanent crisis and paralysis.

He says that it is better to have a less than perfect budget agreement than no agreement at all.

Mr. Barroso has joined many EU leaders in calling for a pause in the constitution's ratification process. One option being considered is to postpone the November 2006 deadline for all members to ratify the constitution. Ten countries have approved the charter, while two have rejected it. The summit is expected to discuss how the EU can get out of the constitutional impasse.

With doubts about the EU's further expansion into the Balkans, Turkey and points further east growing, Mr. Barroso says the EU must keep to its agreements to bring in Romania and Bulgaria, if they meet its criteria, and to begin membership negotiations with Turkey later this year.