Blair and Brown hatch a plan to make France the EU villain.

The Eastern Europeans are traditional allies of the British, who helped to free them of Communism. They don't like the French and Germans much.

Now the Eastern Europeans have joined the side of Britain against France in the EU budget row even though it means a cut in their benefits. Blair is currently the President of the EU -

Tony Blair and Gordon Brown launched a dramatic move to isolate France in the EU budget row yesterday as eastern European nations indicated that they might accept British proposals to cut their funds from Brussels.

In a clear attempt to paint President Jacques Chirac as a brake on reform and the only leader unwilling to give ground, the Prime Minister and the Chancellor insisted that reform of Europe's bloated farm subsidy regime - which France opposes - was a top priority for the EU and world trade.

Mr Blair's demand that France agree to change the Common Agricultural Policy at the World Trade Organisation this month came as he spelled out which part of the British rebate he is prepared to sacrifice in order to secure an EU budget deal.

British diplomats said the Prime Minister wanted to contrast his willingness to compromise with French intransigence in EU and WTO talks - in order to put pressure on the French over CAP reform.

Mr Blair's official spokesman said: "We have to maintain the pressure for CAP reform.

"People have to ask, is it more likely to be done in a situation where we do a deal, or don't do a deal and people are looking around for someone to blame?"

Speaking in Budapest before a meeting of G7 finance ministers this weekend, Mr Blair said Europe had "got to have a more rational budget structure" for farm spending.

Mr Brown, meanwhile, warned in a pamphlet that Europe would not have another chance for a decade to reform its trade and farm subsidy rules.

Mr Blair, who is touring EU capitals, said it was in Britain's best interests to give up part of its rebate from the EU budget, in order to fund the modernisation of eastern and central European nations that are the UK's allies in the fight for wider EU reforms.

The Prime Minister backed that concession with an unmistakeable public threat to the EU's new members that the budget plan Britain was offering them - as current holders of the rotating six-month presidency of the EU - was his best and final offer.

If new members, including Poland, Hungary and the Czech Republic, do not accept the British budget deal at an EU summit on Dec 15 and 16, the baton will pass to Austria then Finland, as they take on the presidency next year.

Mr Blair indicated strongly that Britain would veto any alternative budget deal put on the table next year. This triggered the nightmare scenario for new member states of reverting to an interim, messy system of spending rules that would send them only a third of the money they could expect from a formal seven-year budget package.

After tense meetings with the prime ministers of four former Communist states that joined the EU last year, Mr Blair said Britain would forgo its rebate on all EU funds being sent to the bloc's newest 10 members for development projects.

This concession would cost the Treasury an estimated Ł1 billion a year in extra spending, over the amount Britain sends into EU coffers at present.

The prime ministers of Hungary, Poland, the Czech Republic and Slovakia all made clear their strong opposition to a leaked British plan.

This would slash 10 per cent off development funds for new member states, while leaving untouched the lion's share of EU spending that goes on farm subsidies. But there were signs of progress. Mr Blair's host, the Hungarian prime minister Ferenc Gyurcsány, said new members might swallow cuts, if they were offset by an easing of the rules governing EU aid.

Mr Blair warned: "If any politician is saying, 'Say No, and have no deal in December', the consequences are that you could end up in two years' time with only a third of the money." In an interview with Sky News, he said failure to secure a deal at the WTO would be "disastrous for the world economy".

Conceding that he no longer hoped for progress on the CAP at the Brussels summit Mr Blair said it was vital progress was made in the WTO talks in Hong Kong.

"The only way in the short term you are going to open up the common agricultural policy is through the world trade talks. If the world trade talks fail … that will be a major blow to all of us."

Mr Chirac has indicated that he will veto any budget deal that touches a penny of the CAP, but British diplomats say he will face intense pressure at the WTO unless he shows some flexibility. . . .
Margaret Thatcher long thought that the French and German culture of dominance will not go away but will metamorphis into a new shape that is more politically acceptable and that would be under the benign name of the EU.