BRUSSELS, Oct 23: They may have secured vital Irish backing for the European Union’s historic eastward expansion, but EU leaders striving to unify eastern and western Europe face crucial new obstacles in achieving their goal.

An EU summit in Brussels on Thursday and Friday will see fierce wrangling over the financial costs of bringing 10 largely poor central and eastern European countries into the Union, with France and Germany split over plans to reform the bloc’s costly farm policy and Berlin also balking at having to pay the lion’s share of funds needed to modernize the new entrants’ economies.

The collapse of the Dutch coalition government last week has added to the EU’s enlargement woes, with many parliamentarians in the country voicing open opposition to the 2004 expansion plan and the current Dutch caretaker government calling for piecemeal enlargement.

Uncertainty over the eurozone’s financial stability pact following European Commission President Romano Prodi’s description of the 10-year old euro rules as “stupid” will be an additional worry for the 15 EU leaders at the Brussels summit.

The official view in Brussels and other EU capitals is that nothing will be allowed to derail the 2004 timetable for enlargement. The European Commission has said 10 countries — Malta, Cyprus, Poland, Slovakia, Hungary, the Czech Republic, Slovenia, Latvia, Lithuania and Estonia — are ready to complete negotiations at year-end and join the EU in 2004.

Bulgaria and Romania are expected to be ready for accession in 2007.

Despite pressure from the United States which sees Turkey as a key Middle East ally — especially in any future action against Iraq — the Commission insisted that Ankara did not yet meet any of the EU’s political or economic criteria for membership.

Denmark as current EU president is pressing hard for agreement on financial issues at the summit in Brussels. “We are not leaving Brussels without a result, and I will let it take the time it needs. If not, we will not be able to conclude the accession talks in December,” Danish Prime Minister Anders Fogh Rasmussen warned.

But newly-re-elected German Chancellor Gerhard Schroeder has made no secret of his unwillingness to compromise on vital issues before the end of the year, saying he needs more time to thrash out the financial aspects of east-west unification. In what has turned into a battle of EU giants, France is rejecting German calls to scale down EU farm aid from 2004 to help fund expansion, saying it is too early to discuss such reform. Agricultural spending eats up nearly half of the EU’s 95 billion euro annual budget.

But Germany, a net contributor to the EU budget, is worried about the long-term costs of extending generous farm subsidies to often inefficient producers in Poland, Hungary and other candidate countries.

Also causing concern are fears that despite their low development levels, some new entrants could end up paying more into the EU budget than they receive in the form of grants and development aid.

A key problem is that countries which receive the most money from EU aid funds, including Greece, Ireland, Portugal and Spain, are opposed to any advance aid payouts to Poland and other candidate countries.

The European Commission is insisting, however, that no new member should be worse off financially after entry to the Union than it was in 2003, adding that countries which risk losing out once they join the EU should be eligible for budgetary compensation.

The summit is taking place amid growing concern over the future of the eurozone stability pact. Germany has acknowledged that it will breach the stability pact’s key rule of keeping budget deficits under 3 per cent of Gross Domestic Product (GDP) this year.

Last year, Portugal became the first eurozone country to break the pact with a deficit of 4.1 per cent of GDP. France is expected to breach the 3 per cent ceiling in 2003 in what is widely regarded as a deliberate challenge to the pact.