TONY BLAIR found a surprising and welcome new European ally yesterday in the form of Angela Merkel, the hotly favoured contender to win Germany’s general election in September.

During his fleeting visit to Berlin on Monday the Prime Minister snatched 20 minutes in the British Embassy with Frau Merkel, the head of the Christian Democratic opposition. That appears, however, to have been enough to bring her close to Britain’s position that its £3 billion annual rebate can be surrendered only as part of a wholesale review of the EU budget, particularly its farming subsidies.

During a fierce parliamentary debate, the first of the general election campaign, Gerhard Schröder, the Chancellor, accused Frau Merkel of trying to undermine his credibility at the summit. “You have really done the EU President Jean-Claude Juncker and the German nation a great service by raising British hopes that the rebate will survive,” he said, with heavy irony.

Frau Merkel retorted: “It does not make it easy when one side says the agricultural subsidies are sacrosanct, we cannot touch them, and at the same time flexibility is being demanded from others.”

The comments earned faint applause from her Christian Democratic benches and jeers from the Social Democrats. “The British must move, that is indisputable,” she continued. “But compromises cannot be expected from one side when the other side says that its benefits are sacrosanct.”

The speech was drafted by her foreign policy adviser, Friedbert Pflüger after the Blair meeting and was not discussed broadly within the party. Many Christian Democrats, such as the elder statesman Wolfgang Schäuble, are nervous that Frau Merkel could weaken the Franco-German relationship and pursue a more pro-British line that will ultimately lose them votes.

There are limits, however, to Frau Merkel’s support for Mr Blair. On another priority of Britain’s imminent EU presidency, Turkish accession to the EU, she spelt out a position at odds with Mr Blair’s and more in line with that of France.

“It is an act of irresponsibility to pursue ten years of negotiations with Turkey while all the time holding out the prospect of full membership,” she said. “Politicians who do this, knowing that any referendum on Turkish entry would reject it, are being dishonest and reckless.”

The Christian Democrats favour a mere “privileged partnership” with Turkey. Accession talks are due to start three weeks after Germany’s likely voting day of September 18, and Frau Merkel is hoping to tap into the anti-Turkish sentiment of workers who have traditionally voted for the Social Democrats.

“The fact is (that) Frau Merkel is more interested in scratching away the ground from under Schröder than in jumping on a Blair bandwagon,” one diplomat in Berlin said. “She can see that the EU summit could fail and wants to position herself as a future problem solver.”

The Christian Democrats are 22 per cent ahead of the Social Democrats and look almost unbeatable. A poll published yesterday showed them with 49 per cent and their possibly allies, the Free Democrats, with 7 per cent. The Social Democrats have seen their vote shrink to 27 per cent and their partners, the Greens, to 7 per cent.

With such a generous lead, Frau Merkel no longer has to cater directly to conservative farmer lobbying groups. Pleading for reform of agricultural subsidies is therefore no longer such a big electoral risk. The priority is to erode one of the Chancellor’s main selling points: his talent as a negotiator on the international stage.

The Chancellor, hamstrung at home, is meanwhile desperate for a quick foreign policy victory. “As a result, Frau Merkel has currently moved much closer to the British position than the Chancellor,” a diplomat said. “Whether she will stay that way if she takes over in September remains to be seen. She has yet to see the state of the EU and the German budget.”

Frau Merkel’s intervention pleased British diplomats as Mr Blair sought allies in his attempt to secure a wideranging review of EU finances.

As the summit got under way last night Britain joined other countries in bluntly rejecting the latest compromise from the Luxembourg presidency. This would have frozen the British rebate, although an earlier plan gradually to reduce it was dropped. A senior British official said it was not of any use to Britain because it would cost £20 billion over the period of the deal.

Officials also insisted that the proposed British concession under which the ten latest EU entrants should not have to contribute to the rebate could come in only as part of a wider review of EU spending. “But we are deligthed that balancing of the budget is now more widely accepted,” one said. “The rebate is a symptom of the problem but it is not the problem.”

Mr Blair’s spokesman said that it would not be known until late this afternoon whether a deal would be possible at this summit.

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