The Berlin summit will shape the European Union's budgetary policies and institutions over the next five to seven years. It will be a crucial period in its development.

It will also influence Ireland's position within this changing environment, an environment which determined much of our welfare over the last generation. Two other major issues on this agenda, the future of the European Commission and the looming war in Kosovo, underline how important representation and security will be in coming years.

The EU and Ireland are going through important transitions. The main task of this European Council is to agree an EU budget until 2006. Details on the Common Agricultural Policy, structural, regional and cohesion funds and monies to fund member-states like Ireland which are making the transition from relative underdevelopment to average EU income levels loom large.

They are of crucial concern to many interest groups, as well as to the ministers and officials doing the negotiating.

Behind them there may be discerned a broader framework of priorities emerging from the summit's decisions. Already, retrenched budgets and the reluctance of net contributor states underline the dilution of commitments to cohesion - the policy of narrowing gaps between more and less developed regions.

Ireland's battle to maintain as much as possible of this funding puts it in a camp with Spain, Portugal and Greece, the other main beneficiaries.

But under another heading, the CAP, Ireland is positioned with France, which is among the states most keen to cut back on cohesion budgets. Thus there are no clear alliances in these talks. It is each state for itself, looking after its peculiar mixture of interests and benefits.

This makes for a roller-coaster effect from day to day. It will be impossible to judge the overall situation with certainty until the final agreement is reached.

Looking ahead, the question of whether the cohesion commitment can continue with such limited resources is highly problematic.

The budgetary realism applied rigorously but imaginatively by the Commission to the enlargement talks are a reminder that these negotiations in Berlin will set precedents for agricultural, social and economic aid to the accession states in central and eastern Europe.

Once they join over the next 10 years - the first wave towards the end of this budgetary round - Ireland will be well on the way to net contributor status and among the richer group of member-states, which are measured by average income per head. Agricultural income receipts, which will continue from Brussels (assuming the summit does not unravel the CAP reform programme already agreed by farm ministers) will be more than outweighed by contributions from taxpayers and consumers.

This may open up new arguments about future re-distributive policies. However inadequate average income comparisons are to capture regional and social disparities - which may in fact be widening even as EU transfers are phased out - no better set of criteria has emerged so far from these negotiations. Nor is there any sign of any general EU readiness to increase its own resources or fiscal capacity to cater for greater transfers, funding enlargement, or provide for economic governance to bolster the euro.

It is becoming clearer daily that infrastructure and inequality deficits will have to be met from our own resources as a result of this transition, which may well make for a realignment of politics in Ireland.

The same applies to the new regional structures being put in place by these negotiations, both east-west within this State and north-south under the Belfast Agreement and the special package of EU aid for the North to be accepted in Berlin.

Not for the first time European policies have forced the pace of political change in Ireland, whether in farming, regional or cohesion matters. The same will apply increasingly as the Commission is reshaped and democratic accountability reconfigured through the European Parliament.

It will be necessary to ensure Ireland's influence as a small state is preserved by nominating the most politically experienced and skilled individuals as commissioners and MEPs.

Given these changing interests, the Commission president will have greater power to streamline the institution and bargain with member-states about who they send to Brussels.

Kosovo's presence on the summit agenda stresses the grave crisis developing there and the EU's role in brokering the talks that failed to resolve it. This cannot but spur the development of an EU security and defence identity, including the role of neutral or militarily non-aligned states such as Ireland, Sweden, Austria and Finland. Not to be involved in this debate will certainly reduce Ireland's overall influence in a changing European Union.