POLITICAL will is building in the European Union for a budget agreement next week but British concessions on its rebate will be the key to any deal, a Spanish government source said yesterday. With the 25-nation bloc reeling after voters in France and the Netherlands rejected its new Constitution, member states are keen to heal differences with a deal on its contested 2007-2013 budget at a June 16-17 summit. “The road map for the conference is not yet clear. There are intensive telephone contacts going on,” the source, speaking on condition of anonymity, said. “But there is growing political will for an agreement on the budget.” Spain is one of the largest net recipients of EU funds, which have underpinned robust economic growth in recent years. Prime Minister Jose Luis Rodriguez Zapatero has much at stake and is pushing for any reduction in aid to be gradual. Madrid looks favourably on a proposal from Luxembourg, which holds the EU's rotating six-month presidency, to cap spending commitments in the 2007-2013 period at 1.06 percent of Gross National Income, the source said. A group of six major net payers - Austria, Britain, France, Germany, the Netherlands and Sweden want a one percent cap.
But the Spanish source said it was the British rebate from EU coffers, won by then Prime Minister Margaret Thatcher in 1984, which would be the focus of negotiations. Spain is the third largest contributor to the payment to Britain. “The British rebate will be the key,” the source said. “There is a consensus among the rest of the member states that something must be done here.” Britain wants to keep the refund while Luxembourg has proposed to freeze the rebate at its 1997-2003 level in 2007 and later “set it on a downward path”. “There is a consensus among the rest of the member states that something must be done here.” The rebate was worth about 4.6 bln euros last year. Britain, like other countries, could use its veto to derail any deal it does not like. In an interview with the FT published yesterday, Tony Blair said the rebate would stay but appeared to drop the insistence it was “non-negotiable”. The Spanish source hailed Blair's decision to postpone a referendum on the EU Constitution as “constructive” as it left the door open to ratification at a later date. Spain, the only country so far to approve the Constitution by referendum, would not support any attempt to modify the charter, the source said.

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