The European Council will be meeting today and tomorrow in a bid to sort out the impasse over the European Union’s budget for 2007-2013.

No agreement was reached during the Luxembourg presidency, which ended in a failed summit last June – and matters do not seem to have improved much since then.

Although there seems to be cautious optimism on the outcome of the summit, which starts today, there are still too many issues that are dividing the member states and suggestions made recently have not been welcomed with open arms by everyone.

European Commission President Jose Manuel Barroso, last Tuesday said he believes that French President, Jacques Chirac and British Prime Minister, Tony Blair both want to reach a budget deal at the upcoming EU summit, but described Mr Blair’s space for manoeuvre as being “limited”.

“I sincerely believe President Chirac wants an agreement,” Mr Barroso told journalists over dinner, two days before the start of the two-day summit in Brussels. “France, like everyone, lays down its conditions – but it wants a deal.”

Mr Barroso however added that Blair’s role was difficult because the British media is describing even the slightest concessions on Britain’s budget rebate a “betrayal”. But he repeated his calls for further cuts to London’s cashback and said the adaptation of the rebate should be permanent, rather than on a

temporary basis.

Mr Blair has offered to trim the rebate by about E1.2 billion a year over the seven-year period of the 2007-2013 EU budget. France and other countries have demanded at least a doubling of that. They also want a reversal of the E24 billion cut that Mr Blair has proposed in the overall seven-year budget plan. Britain does not want to give up more of its rebate without an overhaul of the expensive Common Agricultural Policy, of which France is a major beneficiary.

The rebate was secured in 1984 by then Prime Minister Margaret Thatcher, who argued that Britain paid a disproportionate amount into EU coffers and received little back in farming subsidies or regional aid. It has since become a symbol of defiance to Brussels in Britain and Mr Blair is under pressure from political opponents and sections of the British press not to give it up.

A failure to come to terms by tomorrow will push the 25-nation bloc into a deep financial crisis, which would come after the political crisis that it fell into following the rejection by France and Holland of the European Constitution during referenda held earlier this year.

Britain, which holds the rotating presidency of the 25-nation bloc until the end of the year, tabled a new proposal in a bid to break the deadlock. Most EU members rejected the previous proposal and have not accepted the new one as well, meaning that there is a risk of another failure. Many are opposing Britain’s plans to cut EU spending to the 10 new member states that joined in 2004.

Mr Barroso said he hoped the EU newcomers would defend their national interests during the budget negotiations, but they should also see the bigger picture. He also said they should avoid thinking that there is a conspiracy against them.

Where does Malta stand in all this?

Whatever the outcome of this week’s council, Malta will be insisting that its share of the EU budget will be guaranteed. The UK presidency’s proposal, even with a 10 per cent cut in regional aid, does not affect Malta – a point that British High Commissioner, Sir Vincent Fean stressed at a media briefing earlier this month. The government has not said it agreed with the UK’s proposals, although it does believe it can be the basis for discussion.

Dr Gonzi will be insisting that Malta keeps what was agreed to last June. However, he is also aware that failure to reach an agreement could create serious problems for the union. In this regard, he will also insist on a fair deal for every member state – and not for just a few.