Chirac Tells Blair to Try Harder on Eu Budget

Jacques Chirac last night told Tony Blair to give more ground on Britain's £3.8bn rebate if he wanted a deal on the EU budget. The French president told Mr Blair that he must come up with fresh budget proposals before next week's European summit in Brussels, echoing the criticisms of other EU leaders .

In remarks that show that Paris still has its eyes on Britain's rebate, Mr Chirac's spokesman said: "The president expressed the wish that [Britain] should make new proposals, ensuring in particular that Britain takes its full share of financing an enlarged Europe in a permanent manner and not just until 2013."

The intervention by President Chirac, in a telephone conversation with Mr Blair, was the clearest indication that Britain faces a fight ahead of next week's winter EU summit in Brussels.

Leaders from across Europe reacted angrily when Britain announced plans to cut the EU budget by some £16bn from £580bn to £564bn.

Downing Street had been bracing itself for an angry reaction from Mr Chirac - who strongly endorsed the last budget deal for 2007-2013 proposed in June by the Luxembourg government - which would have cut the rebate by £12bn. But President Chirac is clearly deeply unhappy with the British plan, announced on Monday, to cut the rebate by just £5.33bn over the same period.

France believes the rebate, which was secured by Margaret Thatcher in 1984 when Britain was relatively poor, is not justified now Britain is one of Europe's richest countries.

Paris is also angry that the rebate will increase by 40% over the budget period because the enlarged union means it rises as the budget grows.

President Chirac also made clear that he is concerned by Britain's plans to introduce a wholesale review of EU financing in 2008. France believes this could lead to a cut in farm subsidies.

British officials put a positive gloss on President Chirac's intervention, saying that it showed that he was prepared to negotiate. Britain is believed to be reluctant to offer concessions on the rebate.

But the prime minister will make a gesture to the EU's 10 new recruits in eastern and central Europe. They have been enraged by plans to cut their structural funds by £9.3bn.