EU leaders face tense showdown over new treaty

BRUSSELS, June 21 (Reuters) European Union leaders today headed for a showdown over the latest bid to overhaul the bloc's creaking institutions, but chances of agreement may be rising after chief critic Poland softened its tone.

British Prime Minister Tony Blair, attending his last EU summit, said prospects for a deal to launch negotiations on a reform treaty were just ''touch and go'', while Polish Prime Minister Jaroslaw Kaczynski put the odds at 50-50.

Objections by London and Warsaw could yet scupper German Chancellor Angela Merkel's drive to replace the defunct EU constitution and end years of wrangling over the division of power between Brussels and member states, and between big and small nations.

Failure to agree at a summit likely to run into Saturday would be a huge setback for the enlarged 27-nation bloc, two years after French and Dutch voters rejected the constitution, European Commission President Jose Manuel Barroso has warned.

It might prompt a smaller group of member states to press ahead with closer integration, leaving others behind.

Poland has insisted on changing the EU's voting system, which it says favours big countries, especially Germany, at its expense. But nearly all the other EU countries favour keeping the decision-making formula that was spelt out in a constitution draft rejected by French and Dutch voters in 2005.

Kaczynski struck a more conciliatory tone in remarks to Rzeczpospolita daily on Thursday, saying: ''We have made some progress although the situation is not yet fully satisfying.

''Nevertheless, I think there is a chance that our demands are understood. If not we will have to draw conclusions.'' CHARTER Britain says the new treaty must not make the bloc's Charter of Fundamental Rights, including a broadly defined right to strike, legally binding on itself. It also wants to shrink the powers of a proposed EU foreign minister and change the title.

''We need to have it belt and braces bolted down that it will not change British law,'' Blair told The Times of the charter in an interview. ''This is what I need if you want me to agree.'' Senior German officials have deliberately played down chances of a success, stressing much works remains to be done.

New French President Nicolas Sarkozy, keen to help broker a deal at his first EU summit, also highlighted multiple problems.

''We don't just have problems with Poland. We have problems with the Netherlands, the United Kingdom, Poland, a little bit with the Czech Republic. The problems are numerous,'' he told TF1 television yesterday.

Sarkozy said he would put any new treaty to parliamentary ratification and not hold another referendum, despite cries by Eurosceptics that EU leaders are defying the will of the people.

''I told the French people during the campaign I would not organise another referendum. Because the first referendum immobilised Europe. The second would kill it,'' he said.

Kaczynski's statement that Poland could accept the voting system it has opposed for months if it received a bigger say in the Union appeared to indicate a willingness to compromise.

''We realise that we cannot stop the process (of reform) -- that would be too risky for the future ... We just want this to be done in the best possible way for the EU and Poland,'' the often Eurosceptic Kaczynski told Reuters yesterday.

The Czech Republic, which had backed Poland on the voting system, said yesterday it would not veto a deal on the voting issue, leaving Poland without an ally.

Eighteen EU members have ratified the constitution treaty, But there is now agreement to cut it significantly, to allow France, the Netherlands and Britain to avoid risky referendums.

Dutch Prime Minister Jan Peter Balkenende said yesterday the summit would be a ''lively fight'', and his Europe minister added that the Netherlands would have to come home with a result ''that respects the 'No''' vote in his country.

Some key institutional arrangements are set to be kept, such as creating a president of the European Council of governments elected for 2-1/2 years instead of the current six-month rotating presidency which has grown unwieldy in the enlarged EU.

REUTERS SYU RN1432