BARROSO CALLS FOR EU BUDGET COMPROMISE;

UNCLAS SECTION 01 OF 02 BRUSSELS 002419

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL EFIN TU EUN USEU BRUSSELS
SUBJECT: BARROSO CALLS FOR EU BUDGET COMPROMISE;
NEED FOR "SERIOUS" DEBATE ON TURKEY'S ACCESSION

SUMMARY
--------------

1. European Commission President Barroso on June 22
said the EU could face "paralysis" unless its budget
quarrel was settled quickly. Barroso said a clause
permitting review of the budget situation in 2008
might break the deadlock. He cautioned against
"explicitly" linking farm spending and the British
budget rebate. On EU enlargement, Barroso said the
EU should "seriously discuss the signal" sent by the
French and Dutch electorate regarding Turkey. END
SUMMARY.

BUDGET COMPROMISE NEEDED
--------------


2. Speaking at a press conference, Barroso
underlined the urgency of reaching agreement on the
EU financial framework for 2007-2013: "There is a
risk of paralysis if we don't have a decision soon.
This could have very negative consequences,
especially in the new Member States." Negotiations
should resume on the basis of the work of the
Luxembourg Presidency. Barroso said the Commission
would give its "utmost support" to the upcoming
British Presidency, though the first responsibility
clearly lay with the Member States. The Presidency
has the lead in this matter and should take the
initiative in the search for compromise: "More than
any other Member State, the Presidency has to
reflect on the need for overall consensus."

A REVIEW CLAUSE?
--------------


3. Barroso suggested this might take the form of a
clause permitting review of overall EU spending in
the course of the 2007-2013 period covered by the
new financial framework (Note: the proposal to EU
leaders last week was for the review to take place
in 2008). Although it was "not reasonable to put
everything into question," he said, there should be
a provision allowing the EU to adapt to changing
circumstances.

THE CAP, THE REBATE, FRANCE AND THE UK
--------------


4. Asked whether he thought the 2002 agreement
setting the level of Common Agricultural Policy
(CAP) expenditure through 2013 should be revised,
Barroso said: "We reached an agreement in 2002 and
that agreement remains standing. We can only ask
all to make a compromise, a compromise on the CAP
also, a compromise on the British rebate. We don't
have to explicitly link them, but we can ask Member
States to get out of rigid positions." Barroso
added: "If our British friends think they are going
to get everything they want, they are mistaken. If
our French friends think they are going to have
everything they want, it's also a mistake." In the
medium-term, the EU budget will have to undergo "a
certain amount of revision" and a review of its
priorities, hence the idea of a review clause.


5. Noting that the Commission had just adopted a
proposal for the reform of the sugar market, Barroso
argued that the CAP could not be presented as frozen
in stone. At the same time, he noted that the six
countries (read: the net budget contributors,
including the UK) who had signed a 2004 letter
calling for overall EU spending to be limited to
1.0% of total EU GDP, had also reaffirmed in that
letter the 2002 agreement on CAP expenditure.

DEBATE ON EU'S FUTURE
--------------


6. Barroso said the Commission was planning to hold
a seminar in September on the future of Europe. The
Commission will also prepare a strategy paper on
Europe's future, for presentation to EU leaders in
June 2006, and a reflection on the future of the
European social model, which would be an important
contribution to the debate.

TURKEY'S ACCESSION PROSPECTS
--------------


7. Asked about the impact of the current
constitutional situation on enlargement, Barroso
said: "We are all aware that we should discuss
seriously the signal that was sent by the electorate
concerning Turkey." He added, "it would be a
mistake to ignore that we need the support of member
states and citizens for enlargement to proceed.We
shall start negotiations with Turkey on October 3
but it is an open-ended process. That doesn't
necessarily say what will be the conclusion of that
process."

COMMENT
--------------


8. By calling on the EU governments (and the
upcoming UK Presidency, in particular) to compromise
on the budget, the Commission is drawing attention
to its behind-the-scenes activism in the budget
negotiations and trying to find a way for the EU-25
to reach a face-saving compromise in a not-too-
distant future. Coming after the comments by his
predecessor Romano Prodi, who just said in an
interview that the "conditions for Turkey's
accession to the EU in the short or mid-term no
longer exist," Barroso's remarks are also the latest
in a series of comments by EU leaders casting doubts
on Turkey's accession prospects.

MCKINLEY