CHIRAC TO PRESS HIS ATTACK ON THE BRITISH REBATE

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 004235

SIPDIS

E.O. 12958: DECL: 06/15/2015
TAGS: PREL FR EUN
SUBJECT: CHIRAC TO PRESS HIS ATTACK ON THE BRITISH REBATE
AND SEEK ENLARGEMENT SLOWDOWN AT EUROPEAN COUNCIL


Classified By: Political Minister Counselor Josiah Rosenblatt for reaso
ns 1.4 (b) and (d).


1. (C) Summary: President Jacques Chirac, licking his wounds
in the wake of French voters' rejection of the EU
constitution May 29, will attempt to negotiate results at the
June 16-17 European Council that bolster his sagging
popularity at home and demonstrate that he "heard the
message" of the referendum revolt. Having secured German
Chancellor Schroeder's support for a defense of the Common
Agricultural Policy (CAP),and having established Prime
Minister Blair's unwillingness to compromise on the rebate
unless the CAP is also on the table, Chirac will attempt to
isolate the UK and blame any failure to agree on the
2007-2013 EU budget on Blair's "intransigence." Chirac is
also likely to seek a slowdown on future enlargement
decisions, and to insist on Turkey's strict compliance with
EU conditions before accession talks can open. Chirac,
according to British Embassy sources commenting on his June
14 meeting with Blair, appeared to be angling for a "pause"
in the enlargement process in return for agreement to "pause"
the constitutional ratification process sought by Blair. End
summary.


2. (C) With his popularity ratings at an all-time low in the
wake of French voters' rejection of the EU constitution May
29, President Chirac heads to the Brussels European Council
June 16-17 determined to salvage what he can from the
European crisis the French "no" precipitated. Chirac wants
above all to demonstrate to voters at home that he has "heard
the message" of the referendum and is serious about
addressing voters' concerns. Conveniently ignoring
considerable evidence that part of what the French public
voted against was Chirac, himself, the president has focused
on voters' fear for their jobs and social welfare benefits,
and their unhappiness over the EU's most recent, 10-member
enlargement. His priorities will therefore be to ensure that
there is no erosion of benefits channeled to France from the
EU (mostly in the form of subsidies to French farmers),to
limit new EU spending, and to insist that member states hold
the EU's enlargement process on a tight rein.


3. (C) MFA Unit Chief for the Future of Europe Philippe
Setton and Prime Minister de Villepin's advisor on European
economic affairs Rainier Daussonville told us June 14 that
Chirac may be prepared to move off France's earlier
insistence that the 2007-2013 EU budget increase be held to 1
percent of EU GDP, if he is satisfied that the cost of
financing the most recent enlargement is being shared
equally. This implies, according to Setton, that French
flexibility on the budget increase will be tied to the UK
conceding part or all of its euros 4.6 billion rebate.
Chirac put the "British check" squarely in his sights during
his joint press conference with Schroeder in Paris June 10
when he told reporters that "our British friends have to
realize ... that things are evolving and that, consequently,
there is a greater necessity for equity in the charges each
of us supports. Something that has consequences for how one
might assess the technique, antiquated today, of the British
check." Setton explained that economic conditions today in
Britain are completely different than they were in 1984, when
the rebate was voted. Today, with low unemployment and a
reasonable rate of growth, the UK economy is among the
healthiest in the Union.


4. (C) Chirac will resist Blair's attempt to reopen the 2002
decision to defer any revision of the CAP until 2013. With
France receiving 21 percent of the agricultural subsidies
doled out to EU member state farmers under the program, and
with few if any other member states prepared to follow the
British lead on this issue, Chirac has no incentive to
compromise. To do so would be politically impossible for
Chirac, Setton pointed out. Moreover, according to Setton,
the French believe that most member states agree with France
that the British rebate is no longer justified. If the UK
were prepared to compromise on the rebate, France could move
closer to the Luxembourg presidency's compromise proposal of
a 1.06 percent of GDP spending increase for the 2007-2013
budget, Setton told us. Chirac bolstered his case when
Schroeder declared his "complete agreement" with Chirac on
the CAP during their June 10 summit in Paris. In a meeting
which British Embassy contacts here described as cordial
throughout, Chirac told Blair June 14 of his unwillingness to
reopen consideration of the CAP. The only concession Chirac
might be prepared to make would be to accept another
compromise proposed by the Luxembourg presidency that would
exempt the 10 new member states from financing the CAP,
redistributing those costs among established member states.


5. (C) Chirac's second priority for the Council will be to
ensure that EU members states have full control over the
enlargement process and that the EU move much more
deliberately toward any future enlargement. While France may
be prepared to omit mention of specific enlargement processes
in the Council declaration, Chirac will spend time airing his
concerns privately in the Council corridors. Our British
Embassy contacts told us that Chirac was very negative in
assessing the potential impact on European public opinion
that opening membership negotiations with Turkey on October 3
would have. They believe that Chirac may be looking for a
way to delay the start of negotiations. Some of this
determination to go slow on enlargement was reflected in new
Foreign Minister Philippe Douste-Blazy's lengthy interview
with center-right leaning daily Le Figaro June 13.
Douste-Blazy told the newspaper that he believed a framework
already existed for admission of Romania and Bulgaria, and
that, as long as they met the conditions, there would be "no
cause to question their entry." He contrasted this, however,
with Turkey's situation, saying that it "should be clear that
we will be very vigilant (in insisting that) there will be no
opening of of negotiations with Turkey unless it respects the
conditions imposed by the European Council."


6. (C) Finally, Chirac now appears to be prepared to join
consensus, if one emerges, on the need for a "pause" in the
ratification process. While at Schroeder's side, conscious
that the Germans had already ratified the constitutional
treaty, Chirac stuck to his public line June 10 that the
decision to continue with planned referendums or
parliamentary decisions on the constitution should belong to
the member states concerned. Privately, according to our
British Embassy contacts, Chirac told Blair that it might be
best not to proceed with a process that risked producing
additional no's from (potentially) Luxembourg, Denmark and
others that would only deepen the European crisis. Chirac,
our contacts said, seemed to be aiming for a British
commitment to support a "pause" on enlargement and for the
suspension Blair seeks of the constitutional ratification
process.


7. (C) During his intervention in the National Assembly June
15, Chirac's new Prime Minister and long-time protege
Dominique de Villepin evoked all of these issues in detailing
the French position going into the European Council.
Villepin noted that France could not/not agree to increase
its EU contribution to 1.24 percent of GDP per year (per the
Commission proposal),noting that the move from 1 percent to
1.24 percent, while seemingly miniscule, would equal around
1.2 billion euros a year, or almost 10 billion euros for the
entire budget cycle. He also warned against implementing
parts of the treaty piecemeal, noting that the French people
had rejected the treaty. In his closing remarks, he also
said that the failure of the constitutional treaty had posed
the question of the ties between enlargement and deepening of
European relations. "We all know," he said, "that the
rapidity of (the May 2004) enlargement, even if it responded
to a veritable historical imperative, nonetheless really hit
our fellow citizens ... this sentiment was expressed on May
29, and we must take account of it." The French, he said,
"want to know in what kind of Europe they will build their
future and what will be its frontiers."

Comment
--------------


8. (C) His stinging defeat in the referendum and his
plummeting popularity rating leave Chirac with few options
but to project himself as the protector of French interests
at the European Council. He calculates that most member
states agree with France on the need to eliminate or scale
back the British rebate and he assesses that Blair has little
support for reopening the CAP. He is, therefore, likely to
hang very tough on both issues -- even if the result is a
failure to reach compromise on the 2007-2013 EU budget in
Brussels. Perhaps recognizing that such a failure will not
sit well with new member states, Chirac is likely to make
known his willingness to accept a spending increase very
close to the Luxembourg presidency's 1.06 precent compromise
proposal. He may also, in extremis, be willing to concede an
exemption to the new members on financing the CAP. In
return, he will want agreement on the need for a pause to
reflect on the most recent enlargement and to consolidate
before future expansions. This is likely to have
implications, if not for Bulgaria and Romania, then certainly
for the Balkan states, Ukraine, Georgia and other former NIS
states, and above all, for Turkey. End comment.
WOLFF