EU leaders face showdown over new treaty

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BRUSSELS, June 21 (Reuters) - European Union leaders headed for a showdown over a bid to overhaul the bloc's institutions at a summit starting on Thursday although chances for a deal seemed to be growing after chief critic Poland softened its tone.

The leaders hope to agree on the outline of a new treaty to replace the bloc's defunct constitution plan, putting behind them years of wrangling over the EU's future, and launch six months of negotiations to thrash out its final details.

Poland or Britain could yet scupper the push, potentially burying the treaty and risking a future split between a fast-integrating core of EU states and others opting out, and making rich countries wary of funding the bloc, diplomats said.

Poland has insisted on changing the EU's voting system. 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.

Britain says the new treaty must not make legally binding the bloc's Charter of Fundamental Rights, which includes social security guarantees for workers, and it also opposes plans to give lots of powers to a new post of EU foreign minister.

"There are only several questions open which are political and can be answered only at summit level. It is impossible to predict success," said a senior official from Germany, which holds the EU's rotating presidency.

Diplomats took cheer from Polish Prime Minister Jaroslaw Kaczynski's declaration that Poland could accept an EU voting system it has opposed for months as long as it receives a bigger say in the 27-nation bloc's deliberations in other areas.

"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 on Wednesday.

SLIMMED-DOWN TREATY

The Czech Republic, which had backed Poland on the voting system, said on Wednesday it would not veto a deal on the voting issue, further isolating Poland.

The constitutional treaty was drawn up in 2004 to make the EU operate more effectively after its sweeping enlargement into the ex-communist eastern Europe of the same year, and to prepare the bloc's institutions for future expansion.

Although the French and Dutch rejected the constitution, 18 EU members have so far ratified it. But there is now agreement to cut it significantly, a move which would allow France and the Netherlands, plus Britain, to avoid referendums.

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.

Luxembourg Prime Minister Jean-Claude Juncker, a veteran EU negotiator, warned against making too many concessions to countries sceptical about integration.

"Luxembourg and many other states will not stand by and see all the substance removed from the treaty," Juncker said in an interview with German daily Die Welt due to be published on Thursday. "We will do everything we can to get the substance of the old constitutional treaty into the new text."

But Britain fears the new EU treaty might force it to accept too many generous social security provisions and has vowed to defend its position fiercely as it seeks opt-outs.

"If it comes down to deal or no deal ... no deal might be better than buying any old pig in a poke," said British Foreign Secretary Margaret Beckett.

Poland was expected to be the main obstacle. European Commission President Jose Manuel Barroso has warned Warsaw it risked losing EU money and solidarity if it blocks an agreement.

Poland backs a voting system based on the square root of countries' populations rather than population sizes themselves. That would dilute the power of big states such as France and Germany and allow Warsaw to retain more of its current clout.

Keywords: EU TREATY/