EU leaders were early this morning still engaged in tough negotiations aimed at reaching a final deal on the next seven-year EU budget for the period 2007-2013.
Although the atmosphere at the summit was positive with a possible deal just round the corner, last-minute demands from Poland for a bigger share of the increased funds held up the talks, leaving the 25 leaders waiting for hours for the final Presidency proposals. At the time of going to press the EU leaders had still failed to seal an agreement.
Marathon face-to-face talks between Mr Blair and the member states led the UK presidency to present at one this morning, a last "take it or leave it" offer. However, member states had still to analyse the contents of the final proposals before resuming with the final round of talks in the early hours.
According to the third and last set of proposals, British Prime Minister Tony Blair had to bow to pressure and put a further €2.5 billion of its controversial rebate to be distributed among the other member states, particularly the new members.
At the same time, the UK ensured the support of France to have a mid-term review of the EU budget, intended to radically change the way the EU spends its money and leading to a drastic reduction in farming subsidies currently in place.
The latest proposal boost the EU budget to E862 billion for the 2007-2013 billion, up from €849 billion originally proposed earlier in the week. Just before entering the final round of negotiation late last night, Prime Minister Tony Blair said London's new offer ensured that the UK paid a fair share towards the cost of enlargement to the ex-communist countries and open the way to an eventual reform of all EU spending.
"People are really going to have to make up their mind as to whether they want to do this deal at all," remarked Mr Blair.
Earlier during the summit, French President Jacques Chirac, one of the main opponents of the British rebate, said the 25 leaders had made "serious progress" on the 2007-13 budget and were close to a deal that would overhaul the annual British refund.
Mr Chirac told a press conference that he expected the rebate mechanism would be abolished on a permanent basis after 2013.
All along the negotiations the UK insisted that it will only give up some of the rebate if this was connected to a fundamental reform of EU farm subsidies.
According to a Reuters report a EU source said last night Britain's new proposal for the EU's long-term budget restored €5.3 billion in regional aid for the bloc's newcomers from cuts proposed earlier in a bid to win a summit deal.
The extra funds come on the top of some €1.7 billion restored earlier in the week from a total of €14 billion that had been cut in Britain's original compromise proposal for the EU's 2007-2013 budget.
Some new member states threatened to veto the budget unless the cuts proposed initially were significantly scaled down.
Some diplomats from new member states said shortly before the proposal was made they might accept the deal if the final number-crunching shows the British figures, which can be inferred from a highly technical paper, looked credible.
Meanwhile, EU leaders failed to broker a deal on extending reduced VAT rates on key services such as home repairs and hairdressing.
Instead, the issue will be referred back to EU finance ministers in January when a deal is more likely, they added.
France had hoped to include restaurants in services eligible for reduced VAT rates so that Mr Chirac could fulfil a 2002 election pledge to help boost jobs.