Too little, too late, from Blair

Tony Blair showed much of his old negotiating skill at last week's EU summit when, at the third attempt, he finally produced compromise proposals on the financial perspectives for 2007-13 which all his 24 fellow national leaders could live with. This was only after considerable prodding, notably from new German Chancellor Angela Merkel and European Commission President Jos�anuel Barroso.

It was a finely judged offer, balancing the minimum acceptable to his European partners against the maximum which his Finance Minister, Gordon Brown, was prepared to concede without provoking a government crisis. Nobody was ecstatic about the outcome, but there was enormous relief that a settlement had actually been reached (subject to the approval of the European Parliament).

The alternative would have been too ghastly to contemplate.

The deal that emerged was probably the best that was possible in the circumstances. It will enable the core activities of the Union to proceed in an orderly fashion over the next few years, will permit multi-annual planning of the structural funds and it provides for a comprehensive review by the Commission of all expenditure in three years' time (but with no guarantee that it will be amended at that stage).

It takes account of at least the short-term concerns both of recipient states and those, such as the Netherlands, which felt they were paying over the odds. Having said this, the spending limit of 1.045% of gross national income is on the low side.

A figure rather closer to the 1.24% proposed by the Commission would give more assurance that the ambitious targets of the Lisbon Agenda (particularly the urgent need to increase research expenditure) would be met, while giving more leeway to the development of the EU's neighbourhood policies.

Yet satisfaction that Blair's performance came good 'on the night' should not obscure the fact that it was his own obstinacy and lack of realism which prevented a much better deal being reached a year earlier (or one which would have been generally acceptable last June under the Luxembourg presidency).

Blair missed a fine opportunity in 2004 when he refused to negotiate on the basis of the Commission proposal for a 'generalised corrective mechanism' (GCM), which would have dealt with the British rebate on a comparable basis to the need to tackle the excessive payments of some other member states, notably the Netherlands.

If he had done this, he would have had the support of a large majority of member states, instead of putting himself in a minority of one. He could then have used the detailed negotiations to ensure that the British share of the pot was as high as possible.

Instead, Blair declared that the British rebate was completely non-negotiable and put himself into a totally unrealistic bargaining position.

The cost to Blair has been to put his good relations with the new member states under great strain, while the failure to adopt a GCM means that the issue of the British rebate will re-surface whenever future financial perspectives need to be agreed.

It was no doubt his fear of being called a traitor by the Europhobic press in the UK which prevented him from taking a more statesmanlike line in 2004. A fat lot of good that has done him: the same allegations have been thrown at him over the past week.

When Blair was first elected in 1997 there were high hopes that he would finally bring the UK into the mainstream of the EU rather than remaining a 'semi-detached' member. It has not happened and the main reason is that he has never been prepared to face up to the Europhobes.

Almost invariably he has adopted a defensive posture whenever European issues have come up, rather than taking the offensive and spelling out with conviction the enormous cost to Britain and to its partners of our half-hearted commitment.

It may be true that the UK has gained some marginal advantage from the various opt-outs it has secured from EU policies, but the cost in terms of lost influence within the Union has been far greater. In the case of the most important opt-out of all - the euro - it has unfortunately been a question of the British shooting themselves in the foot.

Apart from appeasing Europe-haters in the Conservative Party and right-wing press barons such as Lords Rothermere and Black and Rupert Murdoch, it is difficult to discern any advantage that the UK has gained from its self-exclusion from the single currency. On the contrary, it has saddled British exporters to the eurozone and individual British travellers with hefty transaction costs and has condemned Britain permanently to higher interest rates than in the eurozone.

Blair and his colleagues have never explained this to the British public. Instead, they devised phoney 'economic tests' which affected to show that the adoption of the euro would have disadvantageous effects, though very few economists have taken them seriously.

It is 33 years since Britain joined the then EEC in January 1973. There were teething difficulties, but historians will surely conclude that it is an extraordinary state of affairs that, after all these years, it is still not fully committed, while the Irish, who started from a much less favourable position, have long since joined the mainstream.

Blair, whose days as prime minister are numbered, has probably left it too late to make a decisive difference. It will be left to his successor to show the statesmanship to lead his country towards its full European destiny.

Neither Gordon Brown nor David Cameron have so far shown themselves to be deeply committed Europeans; if anything, rather the reverse. One can only hope that, once they have achieved power, one or the other of them will rise to the occasion.

• Dick Leonard is a former assistant editor of The Economist.

The United Kingdom's Presidency of the European Union achieved a budget deal of sorts at the European Council in Brussels, 15-16 December 2005, but it could have been so much better had UK Prime Minister Tony Blair shown leadership twelve months earlier.