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EU deemed 'in crisis' after budget talks stall


BRUSSELS, Belgium - The leaders of 25 European countries failed yesterday to agree on how to spend billions of dollars in their annual budget, dealing a final, devastating blow to a troubled summit and casting the continental alliance into a murky future.

The summit deadlocked in bitter dispute over subsidies, rebates and financial aid. An afternoon of arm-twisting by senior European Union officials did little to persuade countries, in the words of German Chancellor Gerhard Schroeder, to make a sacrifice and forge a compromise.

"Europe is not in a state of crisis; it is in a state of profound crisis," said Jean-Claude Juncker, the prime minister of Luxembourg, whose country holds the EU's rotating presidency and is chairing the summit.

At a news conference early today, Juncker described a negotiation "in millimeters." Seemingly every country raised objections to the 2007-2013 budget, divided over whether the alliance should be an integrated political entity or simply a free-trade zone.

Reaching agreement on the budget, worth $120 billion a year, was seen as an important test of the ability of the European Union to show that its members still can work together after major political setbacks.

In recent weeks, voters in France and the Netherlands soundly rejected the union's vaunted constitution, an elaborate document meant to streamline the EU's decision-making system and consolidate its influence on the world stage.

Instead, leaders found themselves forced on the first day of their summit to abandon the goal of continent-wide approval of the 300-page document by the year 2006.

Failure to agree on a budget does not mean that the EU screeches to a halt. It can continue to operate on the 2006 budget and, in theory, continue on a program of year-to-year spending.

But planning and longer-term projects, including the building of roads and other infrastructure, become impossible.

The Los Angeles Times is a Tribune Publishing newspaper.

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