Decisive week for the EU

The European Union is entering a decisive week that should culminate in agreement on a first constitution for an enlarged Europe but could produce a recipe for paralysis or end in failure, triggering a severe crisis.

The odds have rarely been more open before an EU summit with such high stakes. Pessimists say a bad deal or failure may lead to a two-speed Europe or even to a slow break-up of the Union.

The new charter is designed to ensure the bloc can function effectively after it enlarges from 15 to 25 states next May, expanding eastwards with a total population of 450 million and about one-quarter of world gross national product.

EU foreign ministers, who hold a final negotiating session today before the summit begins on Friday, have narrowed differences. But the core dispute over voting powers in EU decision-making remains intractable.

The constitutional treaty requires unanimous agreement by governments and ratification by all 25 countries, some of which are planning to hold potentially risky referendums.

"The chances are 50-50. It's not lost, but it's certainly not in the bag," said an official at the heart of negotiations.

Spain and Poland, backed by Britain, are fighting to keep the disproportionate voting powers they won in the last EU treaty, negotiated in Nice in 2000.

Germany and France, backed by a majority of present and future member states, are pressing for a reform of the voting system to take greater account of population size.

The task of seeking a compromise falls to Italian Prime Minister Silvio Berlusconi, who could redeem his widely criticised six months at the helm of the EU if he succeeds.

But yesterday Mr Berlusconi and German Chancellor Gerhard Schroeder said after talks that they were not prepared to accept the Spanish and Polish demands.

"I am personally very glad that the Italian presidency sees the question of voting rights exactly as Germany, namely that it has to stay as the Convention agreed," Mr Schroeder told reporters.

"This is a point on which we are not prepared to move." In Madrid, Spanish Prime Minister Jose Maria Aznar said he had yet to hear a counterproposal from Mr Berlusconi.

Asked if he believed Mr Berlusconi was doing his part to find a new agreement, he told a news conference that Italy "has not put any proposal on the table that we can study."

Mr Berlusconi said it would be better to put off a deal rather than reaching an unsatisfactory agreement.

"It would be a big mistake to agree a convention at any price that would not guarantee Europe institutions able to make decisions and function as we would want," he said.

A draft constitution drawn up by a Convention of lawmakers and national representatives headed by former French President Valery Giscard d'Estaing proposed a "double majority" system in which most decisions would pass if backed by a simple majority of states representing 60 per cent of the population.

The constitution includes such key reforms as the creation of an EU foreign minister, closer defence cooperation, simpler legislative procedures and the extension of majority voting to more policy areas, such as justice and home affairs.

But Giscard sounded the alarm on Friday, saying it would be better to have no constitution than a mutilated one. A gutted, ineffective charter could lead to "the gradual falling apart of the European Union", he warned.

The remaining bargaining chips in the constitution - the number of seats on the executive European Commission and in the European Parliament - are thought insufficient to persuade Spain and Poland to part with their voting power.

Officially, money is not on the table. But Germany, the EU's biggest net payer, has hinted the outcome could affect its willingness to go on funding generous EU regional aid, of which Madrid and Warsaw are the biggest beneficiaries.

How the EU voting system works

Following is an overview of the voting powers in the European Union's Council of Ministers, where EU governments take decisions.

Current system

Under the Amsterdam Treaty adopted in 1997, a qualified majority decision on a proposal from the executive European Commission requires 62 of the total 87 votes in the Council.

In cases where a proposal does not come from the Commission, those 62 votes must be cast by at least 10 of the 15 member states. Abstentions do not count when a vote requires unanimity.

Nice Treaty system

After the expansion of the EU with 10 new member states, the weighted voting system adopted under the 2000 Nice Treaty will come into force. It sets a "triple key" for taking decisions by qualified majority.

To adopt a Commission proposal requires a qualified majority of at least 232 of a total 321 votes, cast by at least half the member states.

In other cases, at least 232 votes, cast by at least two-thirds of the 25 member states, are needed.

When a decision is adopted by qualified majority, a member state can request verification that the majority represents at least 62 per cent of the EU's population. If it does not, the decision is not adopted.

Convention proposal

The Convention of EU and national lawmakers, which drew up a draft EU constitution last June, proposed scrapping the weighted votes for member states in the Amsterdam and Nice treaties.

Instead, qualified majority decisions would be taken where a simple majority of member states representing at least 60 per cent of the population would be enough to adopt a decision.

Votes in Council of Ministers

Amsterdam Nice Treaty Treaty Germany 10 29 UK 10 29 France 10 29 Italy 10 29 Spain 8 27 Poland - 27 Netherlands 5 13 Greece 5 12 Czech Republic - 12 Belgium 5 12 Hungary - 12 Portugal 5 12 Sweden 4 10 Austria 4 10 Slovakia - 7 Denmark 3 7 Finland 3 7 Ireland 3 7 Lithuania - 7 Latvia - 4 Slovenia - 4 Estonia - 4 Cyprus - 4 Luxembourg 2 4 Malta - 3 TOTAL 87 321

(Additional reporting by James Mackenzie in Berlin)