Monday, May 17, 2004

Another dubious engagement

During his press conference after the World Economic Forum, held this year in Jordan for some reason, Secretary of State Colin Powell explained that the USA had not consulted the EU before imposing sanctions on Syria for harbouring terrorists, developing weapons of mass destruction, and generally creating mayhem in the Middle East and other parts of the world.

Indeed not. As readers of the blog may remember, the EU has decided not to back the American action, explaining that it believed in positive engagement. Well, of course, it does. The EU and, particularly, France and Spain, happen to do a great deal of business with Syria, presumably not unconnected with oil. What they might be selling to that country remains shrouded in mystery for the time being.

In fact, Loyola de Palacio, European Commission Vice President, in charge of energy and transport visited Damascus very soon after President Bush’s statement and assured the world that the EU was “determined to boost relations with Syria” and hoped that the association agreement, long time in the making, will be finalized soon.

Given that the aim of the EU common foreign and security policy is to spread the ideals of democracy, liberty and human rights around the world (except when there is a deal to be done with some nasty dictator), we may expect oblique references to the need for reform in Syria and praise for what had already been done, though the attitude of the Damascus government to human rights has not been particularly positive.

It’s "Plan B" – go Dutch

While Irish foreign minister Brian Cowen is insisting that talks on the EU constitution are "making some good progress", another clear indication that they are in trouble comes from Finland's foreign minister Erkki Tuomioja. He told the Finnish Press Agency that one month ago he was 80 percent certain that a deal could be sealed. Now he says it could go either way.

He is not on his own, with Polish foreign minister Wlodzimierz Cimoszewicz also sharing the pessimism. He was "less optimistic" that the deal could be struck by 18 June. He has reaffirmed that Poland has problems with proposed new voting rules, while Austria and Latvia have complained about a plan to reduce the size of the commission.

God is still causing difficulties as well. Italy and Poland, as well as Malta, are fronting Vatican demands that Christianity and God get prominent title credits in the constitution. Spain just wants to add to the tower of babel by having its regional languages of Catalan, Basque and Galician recognised as official EU languages.

Meanwhile, Straw seems to have been mixing it with Germany and France, over the Charter of Fundamental Rights. He has raised "powerful arguments" that its application should be limited. Germany’s Joschka Fischer and his French counterpart Michel Barnier, however, are refusing to back British demands for guarantees to that effect.

According to the Associated Press, Straw also "opposed majority voting in EU foreign policy and taxation matters, arguing Britons would reject that in referendum on the constitution Prime Minister Tony Blair scheduled last month". Said Belgian foreign minister Louis Michel, "We are not making headway on this". A rather sour Barnier said, "I want to remain optimistic... but everyone has to make an effort".

Cowen nevertheless remains optimistic, stating that "The commitment to finalise these arrangements is a very important strong and unanimous commitment…", adding, "I am more encouraged this evening in fact than... discouraged... Based on progress so far I think we will get there."

But, in what is seen as an ominous sign, the Dutch, who take over the presidency from the Irish on 1 July, have informed the meeting that they have a backup plan if members fail to agree on the constitution by June.

It’s unravelling nicely

Agence France Press reports this afternoon that "EU constitution haggling could drag on: Britain". Straw has warned that the IGC could "fail to strike a deal on a long-disputed constitution at an EU summit next month". Repeating the Irish presidency mantra, he adds, "It's in the nature of these negotiations that nothing's decided until everything's decided."

Hinting at disagreement within the ranks of the foreign ministers, he told reporters, "There is no prospect of an overall agreement at least until the June European Council." Asked if he meant that the talks could drag on beyond then, he said: "There's always that possibility. I will make no promises, but we live in hope."

In the time honoured double-speak of international diplomacy, he went though the ritual of saying that all sides were committed to "a very constructive and positive approach" to the talks, but reiterated that London stands by its "red lines," notably refusing veto rights in tax, foreign affairs and defence issues.

Eupolitix has also weighed in with a story, observing that "time is tight" for a deal. It is indeed tight. Whatever is agreed over the next few days but be translated into 20 languages and circulated to the capitals of all 25 EU member states, with enough time for each government to consider their positions and respond. Only then can the agenda for the June summit be finalised, and this too must be translated and circulated.

Even given a large degree of accord, the sheer logistics of the operation are phenomenal but, where there are still outstanding huge areas of disagreement, the task looks almost impossible. Add to that, this is the first ever IGS summit where the heads of states and governments of twenty-five states will be gathered, and the odds of their reaching an agreement look increasingly remote. Altogether, the project looks to be unravelling nicely.

A sense of collective insanity

Stephen Robinson, in an op-ed in the Daily Telegraph makes some hard-hitting points this morning. Reviewing the antics of the media over the weekend, he observes that, "There is a sort of madness in the air in that clammy Westminster microclimate where the twin trades of politics and journalism eat, drink, and think together".

True, it is a bit over the top in implying that journalists and politicians actually think, but the drift of what he is writing is spot on. Commenting on the Iraqi situation, the intervention of Cook, who popped up… "as he does almost every Sunday when news is slow" and the Prescott speculation on the fate of Blair, he adds, "to complete the sense of collective insanity, sections of the media spent the weekend mourning the demise of Piers Morgan…".

That, dear readers, is a good a description of the state of the Fourth Estate as you are going to get. But the consequences are profound. While the media is indulging in its orgy of introspective gossip, the world goes on and, in Brussels – almost invisible to these intellectual pygmies – twenty-five foreign ministers are gathering, their collective endeavours aims at selling this and the other twenty-four nations of the EU down the river.

And not one of the witless hacks who have spewed out their torrent of nonsense over the weekend has any clear idea of what is going on.

Robinson, however, makes another point. After the apparent failure of Blair’s love-fest with Washington over Iraq, he asks how long it will be before the clever-dicks (although he does not use this phrase) turn on the alliance, arguing that it has been such a disaster that "siding with ‘Europe’ is the obvious answer". And the Conservatives, he predicts, will be as clueless over how to respond to that argument as they are in offering alternatives to the mistakes now being made in Iraq.

On that, given the inability of Ancram’s office to respond intelligently – or at all - to the torrent of treaty amendments from the Irish presidency – one can only sadly agree. As well as collective insanity, there is a strong whiff of incompetence coming from Central Office. We are in for a rough time.

Will the eurozone survive till 2010?

As the new members are discussing the possibility of their entering the eurozone, whether they are prepared or not, an influential voice has cast doubt on the whole enterprise. In an interview given to the EUObserver, Nobel Prize winning free-market economist (whose track-record on being right is quite spectacular) has suggested that “there is a strong possibility that the eurozone could collapse in the next few years because differences are accumulating between countries.”

This is not absolutely certain but the differences in the economies, particularly with the entry of the new members, makes running a single currency more and more difficult. Professor Friedman also made it clear that in his opinion the EU is “strangling” the economies of different countries “with rules and regulations”.

Either Professor Friedman was not asked or he did not express an opinion on the EU attempt to build a single economy and the chances of that succeeding.

For full article click here.

You read it here first

More and more these days, as the print media degenerate into platforms pursuing their editors’ personal agendas, the way to find out what is happening in the world is to go to the news agency sites. At least they still concentrate on news gathering, and many of the stories which later appear in print are often taken more or less verbatim from agency copy, embellished by a few quotes from some dim-witted hack.

The foreign ministers’ meeting in Brussels today is a case in point. Reuters and Agence France Press (AFP) cover it, but there is very little in the print media, apart from the Independent – which does at least try to follow European Union news.

The headlines of the agency copy certainly convey the nature of the event which will unfold today and into tomorrow. AFP offers "Clock ticks as EU launches final push for constitution", while Reuters goes for "EU constitution talks enter final straight". The essence of the story is covered by AFP in its first paragraph, as it recounts that, "EU foreign ministers gather in Brussels Monday to launch a final high-stakes push to hammer out a constitution for the enlarged bloc, with the clock ticking towards a deadline only a month away".

Reuters gives it a different but not inaccurate slant, featuring the Irish Presidency, which "starts its most challenging month on Monday as foreign ministers meet to thrash out the text of a constitution for the bloc, ahead of a summit of EU leaders on June 17".

The controversy over voting rights features prominently in both accounts, and the AFP also deals with the question of ratification, "even if an accord is struck". "Big question marks remain", it writes, adding that, "All member states are very aware of the high stakes involved...". A senior Irish diplomat is quoted as saying, "We're going ahead in a mood of determination, of optimism and commitment." He also notes the Polish situation, and the possibility of an August election, but insists "there's no need to panic".

Reuters, however, picks up a bit of the detail, noting a "last-minute change", claiming that EU negotiators on Friday had agreed "to enshrine the goal of price stability in the bloc's charter, at the request of the European Central Bank". Actually, it was Thursday, but never mind. But, according to Reuters, the presidency expects broad consensus on this amendment. "No one had spoken against it". But had they also noted that economic policy is now QMV? Reuters is silent on this issue.

The only other source, at the time of writing, was the Independent, which gets it nearly right. It refers to the plans for changing the structure of the commission, and reports that, "with little more than four weeks until a crunch summit in June to finalise the constitution, the Irish presidency of the EU is playing a waiting game before it presents plans on many of the most difficult issues".

As one would expect, the Independent also deals with Blair’s "red lines" but offers no detail about the nature of the battles to come, and the Herculean task facing the British negotiators, if any are to be salvaged. And it too recounts that the central question remains that of voting weights.

However, none of the sources, as yet, have picked up how much the current treaty draft has changed from the original, supposedly finalised in July 2003, and still on the Convention web site. And it is these changes, I suspect, that many battles will be fought – before even the headline issues can be addressed. And it is in these that, possibly, lie the seeds of failure.

It will be interesting to watch the convulsions of the media, as these issues emerge. Just remember – you read it here first.

Sunday, May 16, 2004

"Europe yes, constitution no"

In what could turn out to be a spectacular own goal, the self-appointed "no" campaign is setting out to use "Europe yes, constitution no" as its main slogan for the referendum fight.

According to the Sunday Times today (print version only), Alex Hickman – he of the "no to the euro campaign" – has been appointed as chief executive, and money is flooding in from a wide range of businesses. The campaign has the support of such “tycoons” as Steward Wheeler, founder of the spread-betting firm IG Index, Sir Stanley Kalms, and Rodney Leach.

The slogan, no doubt, has been chosen to emulate the "success" of the "Europe yes, euro no" slogan, but it is far from certain that the slogan was a winner, especially as it was never tested in a fully-fledged campaign.

On the other hand, it was treated with derision by many Eurosceptic campaigners, and parallels were drawn between the campaign and the Maginot line. While the "no" forces were defending the ramparts against the euro, the tanks of European integration were sweeping through the Ardennes unchecked.

A similar miscalculation may be in place with the new campaign, especially as, to be successful, the "no" campaign is going to have to mobilise a wide range of support. The "in yer face" support for "Europe" may deter many potential campaigners - who might be uneasy associating themselves with a "yes to Europe" banner – from joining fully in the campaign.

This will almost certainly apply to UKIP campaigners – who have already distanced themselves from the "no" campaign with their endorsement of Blair’s claim that voting against the constitution means leaving the EU – but there any many others who, while not going as far as UKIP, will find it difficult to give their enthusiastic support to what might become the official campaign.

A further lack of tactical awareness is also suggested by the Sunday Times, which reports that the campaign is gearing itself for a launch when the leaders of EU member states agree the new constitutional treaty, which they expect to happen on 17 June.

However, even if there is an IGC summit, and a treaty is agreed in June – which is looking increasingly unlikely – it looks more and more certain that the Poles are facing a general election this August, when a strongly Eurosceptic coalition will take power. Even if the current Polish caretaker government agrees the treaty, therefore, there is a high probability that their successors will never ratify it and the constitution will fall.

If that happens, a British "no" campaign may well prove unnecessary. If the proposed slogan is any indication of their tactical skills and thinking, that will probably be just as well.

Really, you have to start feeling sorry for him

As if Tony Blair did not have enough problems, what with the colleagues in “Europe” ambushing him and his own cabinet plotting to get rid of him (do they really think Gordon Brown or John Prescott could run a whelk stall, let alone win an election?) he has now had an offer from Charles Kennedy that he may not be able to refuse.

Mr Kennedy, who, as readers of the blog will recall, said that the European election campaign should be run on … the issue of the Iraq war, has announced on Breakfast with Frost that he was ready to campaign for the treaty on the constitution alongside Mr Blair.

It is reasonably clear that Mr Kennedy has no very coherent idea of what he is talking about, since he explained that: "If we were to have a referendum on a sensible constitution which I think and hope will be achieved shortly, then obviously we will want an all-party campaign.” Who defines sensible?

He did, however, have a ritual moan about the eurosceptics getting it all their own way because the media is on their side and there is no coherent “yes” campaign and, anyway, eurosceptics should welcome the constitution.

To show that he is ready to campaign alongside the Prime Minister, Mr Kennedy became positively Blairite in his syntax: "And the issue we have got to get over ... is look, a constitution is a good idea if it bolts down what Europe can do and what Europe can't do." Disentangling the meaning of that sentence one realizes that Mr Kennedy has not read any of the different versions of the constitution that are floating around.

In the bubble

Despite the loss of the vote of confidence in the Polish parliament, Danuta Huebner, Poland's newly appointed European Commissioner, is carrying on as if nothing had happened. She is saying that she is "optimistic" about an agreement on the constitution, ahead of the June summit.

And, contradicting the statements of Wlodzimierz Cimoszewicz, their foreign minister, both president Kwasniewski and the caretaker premier Belka are, according to Huebner, also seeking a conclusion before the summit. Says Huebner, Kwasniewski "is clearly for a compromise", adding that Belka "strongly supports a conclusion of the negotiations".

How much of this is simply spin, or wishful thinking, remains to be seen. The Irish presidency documents were only issued late on Thursday, comprising 99 detail-packed pages, so it hardly seems possible that any of these three have had time for detailed analysis of the new proposals, or for a considered exchange of views – especially as Belka and Kwasniewski must have been preoccupied with the confidence vote drama. Huebner, it seems, might be occupying her own little bubble, insulated from the realities of thos world.

Meanwhile, despite the crucial nature of the foreign ministers’ meeting on Monday and Tuesday, both the Observer and the Independent on Sunday today seem to devoid of any news or speculation on it, as indeed is the Sunday Times. Of the four English broadsheets, only the Sunday Telegraph, as predicted, covers the story, and then in a highly truncated form.

It speculates that Blair's referendum timetable could be delayed because "a summit to seal a deal on the treaty next month is under threat." Political editor Patrick Hennessy reports that "Ministers believe that the meeting, scheduled for Brussels, could be scrapped because EU states are wrangling over the constitution".

"Downing Street", he writes, "has vowed to do whatever is necessary to safeguard national interests, including taxation, defence and foreign affairs. A more serious threat, however, comes from other nations who cannot agree on fundamental issues, such as voting rights for member states after 10 new countries joined the EU this month. Such an outcome would delay a deal for at least six months, with a fresh summit called at the end of the year."

"Downing Street hopes to get the EU constitution through Parliament by summer 2005, before holding a referendum shortly after the next election. Failure by the EU to agree to the constitution before the end of the year would deal a severe blow to the referendum timetable."

That is all you get – even the Scotsman disappoints. Swamped by Iraq, the abuse stories, and related matters, the media has given up reporting news which is of vital, long-term interest to everyone in this nation.

Like Poland’s commissioner Huebner, today’s editors seem obsessed with their own agendas, also living in their own little bubbles. It is hard to recall any similar period when the public has been so badly served.

Myth of the week

The EU has kept the peace in Europe

This myth has its variations. One that we shall hear more of in the next few months goes something like this: the EU has kept peace in Europe for almost sixty years and if it did not exist, there would undoubtedly be war between the various protagonists.

Last week Europe celebrated or, at least, remembered the end of the Second World War in Europe, with VE-Day in the West and Victory Day on the 9th in Russia and some of the former Soviet republics. There is no point in calling Europe Day or Schuman Day or anything of that kind. It is Victory Day and the tanks roll through Red Square as they have always done.

It is, however, an appropriate time to examine the particularly silly but insiduous myth of “Europe” keeping the peace in Europe. There is an unresolvable paradox at the heart of the European project. Its aim is supposedly to preserve European values and ideals from … the Europeans, since the main reason for the formation of the European Union, according to numerous preambles to treaties, is the bad behaviour of the people of Europe in the past. Unfortunately, the values and ideals were also created by those badly behaved Europeans in conditions that the European Union is now desperate to abolish, that is small and medium-sized, competing political entities.

Thus you get the odd notion that “Europe” will keep the peace against the Europeans. The truth of it all is that by the time Monnet, Schuman and the others got going on the “European project” in all seriousness the political situation in the world had changed irrevocably. As early as the Schuman declaration of the need for European integration (actually written by Monnet) in 1950 it was too late. The problem for which Schuman was putting forward a solution no longer existed.

The ideas of European integration were first mooted between the wars but became particularly powerful after 1945 when Europe awoke to find itself devastated. Even so the number of people who thought integration was the answer was very small; far more believed that economic reconstruction and the development of democracy would be the answer. That is why so much of the early part of the project had to be conducted in secrecy.

The early founding fathers’ aim was European integration because that is what they believed in. But the notion had to be sold and the idea of peace was a powerful one after 1945. There was another paradox, though a less important one here, in that the idea of peace and need to control aggression was propounded by historically the most aggressive state in Europe: France. The French having been defeated in three successive wars by the Germans, were, therefore, the victims and could point to the Germans as the eternal aggressors who had to be controlled.

In fact, with the development of nuclear weapons and the growth of the two superpowers, the USA and the Soviet Union, the question of possible Franco-German wars became a non-issue. The enemy of the West was further east, just as the enemy of the West now is in the south and the east. European integration became an unimportant side-issue. Not the EEC, not the EC, not even the EU could protect anyone from the Soviet Union without a great deal of American help; they could not fight communism world-wide; and they cannot fight terrorism now. The EU can ensure that Denmark does not invade the Netherlands and that’s about it.

It is not political structures that create political reality but the other way round. The reality was that the West, and within not too many years West Germany became part of the West, was not going to indulge in internecine warfare; the reality was that France and Germany neither could nor would fight each other again. The structure of European integration grew out of that and is now looking distinctly rickety.

It is easy to go through the facts and point to the truth about peace.

Fact number one: peace was kept only in a small part of Europe, which happened to be under NATO protection and the nuclear umbrella.

Fact number two: this part of Europe also had American troops stationed in it and was amply provided with American military hardware. Like it or not, and many in western Europe, particularly France do not like it, but a great deal of American foreign policy in the fifty years after the World War II was taken up with the problem of protecting Western Europe.

Fact number three: the countries that contributed most to the protection of Western Europe and keeping the peace in it were not always those involved in the European project. Apart from the UK, the main contributions came from Turkey and Norway.

Fact number four: the main crises of the post war period happened outside the whole European project even if they happened in Europe. Where was the peace-keeping qualities of “Europe” when the Berlin blockade was defied, when Eastern Europe rose in revolt, when the Berlin wall went up? Discussing the Common Agricultural Policy, that’s where. There is no need even to mention problems outside Europe, like the Cuban crisis, the Vietnam war, the wars in Africa and Latin America.

Fact number five: the actual creation of a European Union in the Treaty of Maastricht coincided with the break-up of the Soviet Union and Yugoslavia. While the EU’s influence on events in the former USSR was strictly limited, in the former Yugoslavia it played a baneful part: by trying to construct a common foreign policy through encouraging Serbia under Milosevic to keep the “country” together at whatever cost and by imposing an arms ban on all the other participants, the EU helped to prolong the war and increase the number of victims. Fierce hostilities and massacres were taking place on European soil once again as the European Union was entering what was perceived to be the final stage of integration and, as expected, it was NATO, led by the Americans that imposed some kind of a temporary solution.

Fact number six: The EU is now systematically undermining the one successful alliance that did keep the peace in Western Europe: NATO, without putting very much by way of protection in its place. And all for what? To give itself a notional and structural foreign and security policy.

So let us forget the EU’s outdated attitudes towards politics, war and peace; it is unlikely to do us any good and unlikely to keep or create peace where it matters.

Saturday, May 15, 2004

Howard on fishing

Addressing the Scottish Conservative Party Conference in Dundee yesterday, Michael Howard took time out to make a statement on the Common Fisheries Policy. This is the text:

When I visited the fishing community of Pittenweem in December, I pledged to restore national and local control over our fisheries. The Common Fisheries Policy is emptying our seas of fish and has utterly failed our fishermen. It needs to end. And let us be clear – only a Conservative Government can and will end it. And if necessary we will legislate in Parliament to make it happen.

For if we wait much longer, there will not be a fishing industry left to sustain. My message to Scotland’s fishermen is simple: "I can deliver and I will not let you down".

According to fishermen present, Howard could not have done better. One was impressed not only by the words, but the way they were delivered. "Reading it (the speech)", he told us, "doesn't give the emphasis he put on the points he made. It has taken many years of hard work, along with encountering substantial abuse and ridicule, from within, as well as without the industry, before we have got a Conservative leader to speak in such a committed way. It has been worth it all".

And so the die is cast... we are on our way out.

How we manage crises

From May 18 to May 27 the EU will be conducting its third crisis management exercise. No, this will not be another draft suggestion non-proposal working document on the Constitution by the Irish Presidency, but an exercise within the framework of the European Security and Defense Policy and will involve “Member States (Capitals and delegations), relevant EU Council instances, the Secretary General/High Representative, the European Commission and the Satellite Centre”.

No troops will be involved, possibly because there are no EU troops to involve. On the other hand it is slightly difficult to understand how the EU wants to improve its “crisis management structures, procedures and consultation arrangements, including the development of concepts of operation” if it does not accept that the first thing that must be done in a crisis is to defuse it and that might require the use of troops.

The idea is that the EU learns to deal with crises without needing to have recourse, i.e. run for help, to NATO, though it will always recognise “the primary responsibility of the UN Security Council for the maintenance of international peace and secuity”. And a good thing too. After all, the UN has a great deal of experience in these matters from Srebrenice to Rwanda, from DR Congo to Iraq with all stations in between.

The exercise will be conducted in Brussels and other national capitals. We await with bated breath the military and civilian exercise that involves all the high panjandrums but no troops on the ground.

Dead in the water

It is quite extraordinary that the media in general failed to pick up on the events in Poland yesterday. One is further dismayed by the lack-lustre coverage of EU affairs in today’s newspapers.

For sure, the sacking of Piers Morgan was an important event, in news terms, but if space to cover EU issues was limited, that was all the more reason why such coverage as was afforded should have been accurate and to the point.

The Times, however, excelled itself in producing a thoroughly inaccurate story, which completely missed the point. Homing in on the appointment of EU commissioners, it announced that "Britain will have to give up its right to appoint a European (sic) commissioner under a proposal aimed at reaching agreement on the draft European constitution".

Wrong, wrong, wrong. Anthony Browne, the Times Brussels correspondent, has been listening to the spin, instead of doing his homework and reading the Irish documents. Had he done so, he would have found – as revealed in this Blog yesterday – that the presidency has not made any proposals at all. It has merely listed the options "mooted" by some of the member states.

Why this distinction is so important only becomes apparent if one understands how the IGC process works – which clearly Mr Browne and his colleagues do not.

On Monday and Tuesday of this week (17/18 May), there is a meeting of foreign ministers from EU member states in Brussels, sitting as the General Affairs and External Relations Council, but also, quite separately (although at the same time – which always confuses the hacks) as an IGC.

In the general scheme of things, foreign ministers are second only in rank to heads of states and governments in the IGC process and, traditionally, in the working up to an EU treaty agreement, they do most of the donkey work.

Thus, when a final summit of heads of state and government is due (planned in this case for 17/18 June), at which a new treaty is scheduled to be agreed, the final meeting of foreign ministers immediately before that is the crucial event.

It is at this meeting that as many outstanding issues as possible are agreed, and the agenda is finalised for the final summit, comprising only those irreducible issues which cannot be agreed by the foreign ministers. The more items unresolved which go on to the final summit agenda, the less likely it is that agreement will be reached.

In this context, it will be remembered that, at the Nice summit, there were only four substantive agenda items. Yet the summit went into the fifth day and very nearly collapsed. Equally, the last summit in Brussels in December did collapse, under the weight of unresolved issues.

Looking ahead, therefore, we see a foreign ministers’ meeting scheduled – the last before the supposedly crucial summit – when far from being able to prepare a final agenda for the heads of states and governments, the ministers are not even able to agree their own agenda. And far from the numbers of issues outstanding being steadily reduced, what we are seeing from successive presidency documents, is an increasing number of contentious issues appearing.

This parlous state of affairs is illustrated by the press release issued today by the Irish presidency, trailing the Tuesday meeting. It announced that "Foreign Ministers will discuss the IGC and will seek to make progress on the outstanding issues on the basis of two working papers produced by the Presidency…". This does not sound like a meeting where definitive conclusions are going to be reached.

That brings us to Toby Helm’s piece in today’s Daily Telegraph. Known as a New Labour groupie, Helm proclaims that Blair is to "revive Thatcher's hard line on Europe", thus retailing a huge dose of spin that has been doled out by Downing Street.

In fact, this is more likely to be damage limitation. In anticipation of the collapse of the June summit – or its postponement - Blair is getting in first. Then, when the brown stuff hits the fan, he can claim the credit for something that was going to happen anyway. For, if the Poles, or even the Maltese, do not torpedo the summit, Blair – faced with mounting challenges to his “red lines” - would have to do so himself.

Hence the quote from an unnamed official, retailed by Helm: "We have a huge list of demands, but we have nothing to give them back in return. We can't and won't give any ground at all." The constitution is dead in the water. It’s just that the media have not woken up to that fact yet. However, watch for The Sunday Telegraph tomorrow.

Polish shock could doom constitution

Source: AFP and others

In what could be the final death knell to the prospects of a conclusion to the constitution this June, Marek Belka, the Polish prime minister designate went before his parliament today – and lost the vote of confidence in his new government by 262 to votes to 188, with no abstentions.

As flagged up in our previous story, Poland not in the bag, the Polish prime minister is now a lame duck, with no mandate whatsoever to sign up his country to the constitution.

Parliament now has fourteen days to find another candidate, failing which President Aleksander Kwasniewski has to designate a new potential prime minister, while Belka stays on as a caretaker. The president has said he will try to re-appoint Belka, but analysts believe he will simply be rejected again.

The opposition is unanimously backing an early general election and, given the spectacularly low approval ratings of the present SLD ruling party, of which Kwasniewski is a former member (he was required to resign, on taking office), there is every likelihood that it would be swept from power. This will leave the way open for either the Self Defence Party or the League of Polish Families. Both are highly critical of the current EU accession deal and would be unlikely to support the constitution.

Unless Kwasniewski can put his own man back in power, therefore, and stave off an early general election – which at present looks highly unlikely - even a postponement of the June summit might afford no relief. The constitution – in the face of Polish opposition – could have to be abandoned for the foreseeable future.

What makes good neighbours?

The EU would certainly like to know the answer to that question as it unveils its European Neighbourhood Policy. Günter Verheugen, the Commissioner in charge of Enlargement has announced that the EU wanted to avoid renewed division lines in Europe. Undoubtedly, that is why it has demanded that the new member states in the east strengthen their, or rather, as the EU would prefer it, our borders against the neighbours even further east.

As predicted the EU has decided not to concentrate on countries that lie in the immediate neighbourhood, are very poor and likely to be a problem as they struggle to survive between Russia and the European Union, such as Ukraine, Belarus and Modova. Instead, the Neighbourhood Policy encompasses those countries but also Russia, Armenia, Georgia, Azerbaijan and, in the south, Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria and Tunisia, as well as the Palestinian Authority.

As these countries are not considered to be on the list of possible entrants into the EU, those who are, such as Turkey and Croatia are not included. But there is no real explanation of the details. Verheugen may say that "a real stake in the enlarged EU so that they too can develop and prosper", but what does that actually mean? What will the EU do to help such disparate countries with such disparate problems?

It seems that the various partner countries will be invited to align their laws and rules to WTO ones and also the EU internal market ones. Whether that will help them remains somewhat doubtful, given how unhelpful the internal market rules have been to the economies inside the EU.

The EU also promises to encourage good governance and human rights – not its strong points in foreign policy – and promote co-operation to combat terrorism and cross-border crime. And, no doubt, motherhood and apple-pie.

Friday, May 14, 2004

North Sea Oil – a non event

Much has been made, in certain quarters, of the "defeat" of the attempt, supposedly to bring Britain’s North Sea Oil reserves under the ultimate control of the EU. Actually, this is a non-event; some might even say a "red herring". The issue has served merely to distract from more important provisions in the new Irish draft.

For sure, energy was in the original draft of the constitution (Article III-157), with a provision that would have empowered the EU to "ensure security of energy supply in the Union". This text was so widely drawn that commentators were quite right to make a fuss about it. Knowing the EU’s penchant for turning loosely worded, general provisions into fully-fledged policies, back by a raft of competences, there was good reason to fear that a take-over grab was in the offing.

However, in the important but much-ignored presidency "working document" or "non-proposal" of last week, Article III-157, was effectively eviscerated. The vague wording of the original was changed to exclude Community action, by stating that no EU laws could affect a member state’s "right to determine the conditions for exploiting its energy resources and the structure of its supply…".

To that was added a declaration that the "Conference" believed that the article did not affect the right of the member states "to take the necessary action to ensure their energy supply…". With that, Article III-157 was effectively a dead letter. Deleting it in its entirety from the very latest draft was simply acknowledging that fact.

Nevertheless, as Ambrose Evans-Pritchard reported in the Daily Telegraph this morning, British diplomats are still preaching caution. Said one, "others could demand that we put energy back in the text".

Here, there may be an effect on the forthcoming ministerial meeting. If member state representatives waste time squabbling over whether this provision should be reinserted, and then spend further time arguing over the text, in the face of implacable British hostility, the opportunities to deal with other, much more pressing issues will be even more limited.

A squabble over energy, therefore, could be yet another factor which drives an already overloaded agenda into the buffers, and makes bringing the constitution to a conclusion at the June summit – if it happens – an even more unlikely prospect than it is already.

Co-ordination of economic policy

adds: see penultimate paras

Moving on now to the second of the two Irish documents, CIG 76/04, there are many things here of interest, and some to cause considerable alarm. One of those is the provision on the co-ordination of economic policy (Article I-14).

Already strengthened by the new Irish presidency draft, Article I-14 started off by requiring member states to co-ordinate their economic policies within the Union.

In the new draft, however, the simple requirement for member states to afford that co-operation, "…in particular by adopting broad guidelines for these policies", had become, "…in particular broad guidelines for these policies shall be adopted".

In the current draft – that is the new, new proposal – this provision has a small but important addition. It now reads, "…shall be adopted by the Council".

This might not seem much of a change, and could be regarded as merely a tidying up and/or clarification. But, in the manner of things EU, the significance is not so much in what is written, but in what is not. Nowhere in this passage do we see specified the voting regime by which the guidelines shall be adopted.

For that, though, we have to refer to Article I-22 (3) of the constitutional draft, which states with disarming simplicity, "except where the Constitution states otherwise (note the capital 'C' – they do like their capitals), decisions of the Council shall be taken by qualified majority".

There we have it. With the addition of the words, "by the Council", the decision which might have been taken in a rather woolly way by the European Council (a wholly different institution) – as in the Lisbon process – now becomes firmly embedded in the Council.

And because the process is embedded in the Council, without and specification as to the voting regime, its decisions on guidelines for the co-ordination of economic policy (don’t let anyone kid you that they will remain "broad") will be taken by QMV, and they shall be adopted by member states.

A clue as to how "unbroad" those guidelines might be can be seen from another little amendment tucked into the new, new draft, this one in Article I-3 (3).

Setting out the "Objectives of the Union", the original Article gives the EU the grand objective of working for "the sustainable development of Europe based on balanced economic growth and...".

In the "new, new" draft however, a mere two words are inserted after the "and": "price stablity". Yet these little words add immesurably to the economic competences of the Union, allowing it to specify guidelines on prices, direct inflation measures (which must surely include public spending) and sundry other matters.

These amendments, individually and collectively, I believe, are lurking on our side of one of Blair’s red lines. If they are, that particular red line is seriously holed below the waterline and sinking fast.

As incredibly, if Ahern is so anxious to get his beloved constitution through, why is he adding yet more provisions that are going to make it almost impossible for Blair to accept it? If Blair actually notices the amendments, that is.

Our indecision is final ... until next week

Helen Szamuely

What is one to make of the plethora of documents pouring out of the Irish Presidency just about a month before the Constitution is supposed to be decided and agreed on finally? The Summit will gather in Dublin on June 17 and agreement will, in theory, be reached on June 18 (which just happens to be Waterloo Day).

As we have reported on this blog, there have been signs that all is not well with that ailing patient, the consensus. One of the curious aspects of all these discussions that nouns, even abstract ones, acquire a personality. If the EU cannot for the moment have a legal personality, at least various other aspects of it can.

There is some logic to the Presidency having a will and intention of its own, since this is an accepted constitutional idea. One habitually refers to the American administration in personal terms, or to Downing Street as expressing opinions. The idea behind these and similar statements is that certain constitutional structures or simply accepted places of work and residence exist above and beyond the people, or, in the case of the EU Presidency, the member state, temporarily occupying them.

The EU seems to have moved beyond that and endowed all sorts of organizations and structures with a personality. For instance, many of the recent documents have centred round a "meeting of focal points" that took place in Dublin on May 4. Focal points can meet in geometry and, even, in geography. But in politics? Who took the chair? An überfocalpoint? And who took the minutes? How did all those focal points arrive to the meeting and what did they have by way of refreshment?

Even before what must have been a very odd meeting we had a very curious document (CIG73/04). This consisted of over 130 pages of various proposals of changing the text of the draft EU constitution (analyzed on the blog at length). The thing is, it was not a proposal. In fact, the document began with the uncompromising words:

"The Presidency wishes to stress that this is purely a working document. It is not intended to be seen in any way as a fresh overall Presidency proposal."

Perhaps they should have informed members of the British Government of this distinction, for on May 5, as we have already noted, Baroness Symons of Vernham Dene, referred to the "working document" as "the presidency’s proposal". Maybe Lord Willoughby de Broke was right when, speaking in the House of Lords debate on the latest developments in the constitutional discussions, he referred several times to the document as a "non-proposal" and pointed out that for a "non-proposal" it had rather a large number of new proposals.

Confused? We haven’t even started.

Then, following the meeting of "focal points" the Irish Presidency issued another document (CIG 76/04). It is not clear whether these are "proposals" but they are certainly "draft texts". Or so it says on page 1. In fact the document is "a series of draft texts on which there seems to be a likelihood of broad consensus in the context of an overall agreement."

This is carrying caution to the most extraordinary lengths. Are we to understand that a month before a final agreement is to be made, after 18 months of endless meetings of the Convention, whose task it was to produce an acceptable document, after an acrimonious and unsuccessful IGC, after months of shuttle diplomacy on the part of the Irish Prime Minister, Bertie Ahern, the Presidency is still cautiously producing texts on which there seems to be a likelihood of broad consensus? And if it is still so difficult to reach a narrower, more focussed consensus, why is that self-same Presidency adding more and more contentious issues on EU foreign policy, taxation and other such matters?

There is a Ministerial meeting due on May 17 – 18 and the Presidency has tried to produce another document (CIG 75/04) for that. (At least one knows what a Ministerial meeting is.) In this the emphasis moves away from the somewhat contentious issues that had been discussed as far as one knows by those focal points and other matters are raised.

In the peramble the Presidency repeats that "[t]he principle that nothing is agreed until everything is agreed" and that the matters discussed by those "focal points" probably do not need "further discussion at Ministerial level". Since these included quite weighty issues, one wonders when they will be discussed at Ministerial level.

So, what is going to be discussed on May 17 – 18, exactly a month before that decisive Summit? There is the scope of qualified majority voting (rather a thorny issue, one would have thought); the composition of the Commission, though the document says that it "can only be finally resolved as part of a balanced outcome on major institutional questions", clearly still undecided; and one or two other matters of lesser importance in general but probably quite significant to individual members.

There is a heartfelt plea at the end of the preamble: "To facilitate the most efficient and productive discussion, the Presidency would ask the delegations to intervene only on those issues of particular concern to them or where there is a particular point they wish to raise." As opposed to just talking for the sake of talking, one assumes. Well, we have all sat through meetings like that.

Where do we go from here? Will there be another Irish Presidency document next week? Will that be a set of proposals or non-proposals? Are we to have working documents or draft texts? Will Ladbroke’s open a book on it?

There used to be a rather wicked joke about the man who goes into the public library and asks for a copy of the French Constitution, only to be told rather snootily that the library did not stock periodicals. The EU Constitution is merely a draft and it has already become a periodical.

No decision on composition of commission

Contrary to some media reports, the highly controversial issue of the commission composition is very far from settled. In fact, all the Irish presidency has done is offer a highly tentative outline for discussion. So tentative is this that it states "The Presidency is not for now proposing Treaty language on the key issue of the composition of the Commission".

Furthermore, the presidency sticks by its own terms. Rather than making any proposals, it simply draws attention to the "various possible options" that have been "mooted", namely a slimmed down commission of 15 members, or a number representing a proportion of the total number of member states, "for example, one half or two-thirds". Although the figure of 18 commissioners has been mentioned in some press reports, the reference in the presidency document refers to this number only in the context that it "recalls that in previous discussions several delegations have expressed interest in an eighteen-member college…".

Thus with three different ideas, rather than proposals, on the table – as well as a caucus which opposes any reduction in the "one state, one commissioner" status quo - there is not even a substantive proposal on the table, much less any move towards consensus.

With a diffidence that does not augur well for the negotiations to come, the presidency then adds that it "is aware that for many delegations this issue can only be resolved in the context of an overall settlement of the institutional issues". In other words, the issue is linked with others, in this case, with the voting rights controversy. That is a very bad sign.

Unsurprisingly, the presidency is hedging its bets by suggesting that the implementation of any plan should be delayed until 2014, but then shows what might be either desperation or frustration (or both), by stating that "it would be preferable to resolve the matter now, with a view to avoiding protracted debate in the future and to offering citizens the greatest possible clarity".

However, given the sensitive nature of this issue, with no substantive proposal on the table at this late stage of the negotiations, it seems hard to believe that this matter can be resolved in time for the June summit.

Red lines not settled

The second part of the Presidency discussion document (CIG 75) refers to the "scope of qualified majority voting", in which the Presidency notes "the desire of all partners to find a balanced compromise which responds to the general wish for further extension of qualified majority voting, while, at the same time, responding to the wishes of some who prefer to see unanimity retained in a number of sensitive areas".

On the table, flagged up for further discussion therefore, are the proposals issued in the previous presidency draft, covering diverse areas. The include judicial co-operation on criminal matters, the European public prosecutor’s office, QMV in the field of the common foreign and security policy, taxation, social security payments, all where an element of QMV is currently proposed.

But the presidency also proposes to allow discussion about introducing QMV on determining the level of the budget and "enhanced co-operation". It is asking for "Ministers’ views on how a balanced outcome can best be ensured", meaning of course that there is still a considerable divergence of views.

Many of these issues are directly in Blair’s "red line" territory, which means that his lines are far from secure, despite his posturing and claims that he is going to "toughen up" his stance. They are still very much open to debate, and must be thrashed out on 17/18 May, in less than three days time. And, from the tone of the presidency statements, it appears that the UK is very much in the minority.

Budget procedure

The amendments to the budget procedure have been maintained in the new text. Here, the particular area of concern was that, if the European parliament rejected a budget, even if the Council had approved it, the parliament could still ask the commission to submit a new budget.

This provision is highly significant, as it gives the federal parliament the ultimate power on the spending plans of the commission, enabling it to over-rule the Council and, ultimately the member states.

The Irish presidency, in its discussion document (CIG 75) recognises that there are problems allowing this to go through – reflecting Gordon Brown’s "input" last Tuesday. It writes, "on the basis of discussions to date it appears that, while the proposal is acceptable to many delegations, it will not attract sufficient consensus." The difficulty, it sees, in maintaining the "inter-institutional balance" – i.e., the division of powers between the Council and the parliament.

However, it continues, the proposed changes to other aspects of the Union’s financial arrangements, "make it impossible to maintain the existing balance in the precise terms in which it is currently defined".

This is a heavily coded marker which says "watch this space". There is here, clearly, a major disagreement, and one which is going to be very difficult to resolve.

It's complicated - and worse

In reviewing the last Irish presidency "working document", described as a "proposal" and a "non-proposal", I referred to the "toe-curling opacity" of some of the provisions and their amendments. So complex were they that comprehension is almost beyond the wit of any mortal man - the very antithesis of transparency.

With the latest set of documents, it does not get any easier. We are now having to deal with amendments to amendments, with texts being subtly altered. The results, however, are far from subtle, or unimportant.

The first example of this - of what will be many posted today - is the controversial issue of the arrangements for the presidency for the Council of Ministers.

In the original draft (Art I-23) the presidency was to be held by member state representatives "on the basis of equal representation for periods of at least a year". In the 29 April draft, this provision was deleted and the decision was passed to the European Council, to be "established unanimously be a European decision."

That, in effect, meant that the Irish Presidency had ducked the decision. It was no longer to be in the constitution - instead it was to be made at a later date by the European Council. But at least the decision was to be taken unanimously.

Now, however, the draft has been further modified. Responding to the "wish of many to provide for greater flexibility in the future," the Irish presidency it is now proposing that the presidency arrangements could be amended by QMV. (CIG 75, p 4 and 9).

Although not exactly one of Blair's "red lines", the "colleagues" set great store by their institutional arrangements, not least because he who holds the chair, sets the agenda. And, in effect, that agenda-setter is to be decided by QMV, representing another small, but significant loss to the members states of their powers.

So far, therefore, all the amendments point in one direction - towards a diminution of the powers of the member states.

This makes one paragraph in today's Daily Telegraph all the more extraordinary, where Ambrose Evans Pritchard wrotes, albeit in respect of another provision:

"Britain is relaxed about the latest change, believing that real power under the new constitution will be concentrated in the Council of Ministers, while the commission is knocked down a peg or two".

Hence survives and is reinforced the canard that giving the Council of Ministers, or the European Council, more power is somehow acceptable. But they are both EU institutions, and power assumed by them is power taken from the member states - even more so when QMV is involved.

On the cards with this provision, therefore, is a significant loss of such power, more than was first proposed in the original constitution.

More to follow.

Another new draft

The Irish presidency have issued yet another constitutional treaty draft, plus notes for discussion at the ministerial meeting on 17/18 May. Some of the changes have been flagged up in this morning's press, but these reports are far from comprehensive - the new documentation runs to 99 pages.

Further reports and analysis will be posted throughout the day. To see the new draft (CIG 76/04) click here.

A taste of things to come

Source: Financial Times, and others.

With Wen Jiabao, China's premier having recently toured EU member state capitals – including London – in an attempt to get the arms embargo imposed in 1989 following the Tiananmen Square massacre lifted, the US House of Representatives has fired a warning shot across the bows of the Union.

It is threatening to restrict the sale of US military equipment and technologies to its European allies if the arms embargo is lifted. Legislation was approved by the House armed services committee late on Wednesday that would impose new export restrictions on sales of US defence and sensitive commercial technologies to any country selling arms to China.

In addition, the committee adopted an amendment that would bar the Pentagon for five years from doing any business with a company that sells arms to China, a prohibitive penalty for any of the European defence companies.

The EU has already eased its interpretation of the embargo, allowing sales of about $200m in "non-lethal" military equipment to China in 2002, and has entered into an agreement with China for the joint development of the Galileo satellite positioning system, which has important military applications.

Now, the French and German governments, in support of their respective arms manufacturers, are lobbying other EU member states to lift the embargo completely. They are anxious to capitalise on the increasing arms purchases by China, valued at $2 billion a year.

However, if the Franco-German axis is successful, this could have a significant impact on the availability of US weapons to Britain. At risk is the $200bn Joint Strike Fighter project, on which Britain is relying to equip its two new carriers, which will form the bulk of its naval strength in the first half of this Century.

Not only would this be denied to Britain, but there is even the prospect that the current administration’s attempts to ease controls on sales of other military goods to Europe would be blocked, seriously affecting the efficiency of Britain arms forces which rely more on US equipment than any other country in the EU.

Once again, it seems, Britain’s own interests are being put at risk by its EU partners. If the UK continues down the path of integrating defence and security policies – as proposed in the EU constitution - it could find itself treated as an inseparable part of the EU bloc, for the purposes of the sale of arms and other strategic materials.

Europhiles should, perhaps, be asked if this is a price worth paying, for a constitution that most British people do not want anyway.

Thursday, May 13, 2004

The gap widens

Sources: AFP, Malta di-ve

Following our story Poland not in the bag, Cimoszewicz has now told his own parliament that a deal has not yet been finalised on the EU constitution . "From our standpoint the proposals that we are discussing and other suggestions do not constitute the basis of an agreement," he told the MPs. "I cannot confirm that Polish proposals have been met with universal approval."

Meanwhile, Ahern, thrashing around the southern fringes of the EU empire in an attempt to drum up support for this rapidly failing venture, has come up against unexpected resistance in Malta. There, the government of a largely Catholic nation – no doubt under instructions from the Vatican - is insisting on a reference to the EU's Christian heritage being included in the constitution.

The hapless Ahern found himself addressing a joint press conference together with the Prime Minister of Malta Lawrence Gonzi at Auberge de Castille, telling the assembled hacks that he did not see any possibility of reaching a compromise between all the countries on this issue.

All he could do was “try to ensure” that under the Irish Presidency, the EU reached a consensus on the EU constitution. With what seems to be more than a hint of desperation, he concluded, “What we want to achieve is enormously important for the people of Europe and for their future”.

Chirac and Schröder, on the other hand, seem to be content to inhabit their own private little planet. After their love-in today at the Elysée Palace, they came out beaming, to declare their confidence in the “project”.

"I can't imagine that the constitution, this important work of European unification, might not be approved" by parliamentary vote or referendum in EU member states, Schröder told a joint press conference, demonstrating that, in and amongst his other many failures, he was also a man of very little imagination.

It what rapidly became an epidemic of imagination failure, Chirac chipped in with the royal “we”, adding, "We can't imagine that such a situation would occur." Schröder then capped it all by saying that, "We must devote all of our energy to help ensure that these referendums pass”, which is a bit rich when neither he nor Chirac – yet – are having referendums.

Completing the grand tour of political fantasy, and therefore qualifying for (or as) le premier prix, Chirac closed by deciding that an agreement on the constitution before next month's summit was "possible and desirable". “We” have spoken. But what about the people?

New pupils are doing well

In particular, the new member states of the EU have learned from their elders, if not betters, how to fudge statements about the budget deficit. During the very first finance ministers’ meeting after the champagne corks stopped popping Andrzej Raczko, the Polish Minister, said: “It is important how a country plans to lower its deficit and not what this deficit is.” Quite so.

Of course that is not exactly what the Growth and Stability Pact said but who’s counting or, for that matter, reading the text of the Pact? Was it not a German government spokesman who, with singular lack of originality, said that it must not become a “Stagnation Pact”? The word the OECD used to describe the economy of Continental Europe and Germany in particular, was “sluggish”. “Stagnant” will presumably come next year.

Then there is Siim Kallas, Estonian Commissioner, a man whose political past is dubious enough to have prompted several parties and groupings in the European Parliament to raise questions, who presented the Commission’s report on the new members together with the also new Economics Commissioner Joaquin Alumnia (though he is new only because his predecessor, Pedro Solbes, decided to desert the SS Commission and sign on with the newly launched SS Zapatero Government).

Mr Kallas spoke of the need to enforce budget rules strictly. “A balanced budget is very good for society," he said. "It leads to things every European citizen wants: stability, growth and security." Indeed so. Whether the Growth and Stability Pact leads to that, remains doubtful.

What brought all this and much more sanctimonious outpouring is the not unexpected news that the new entrants into the EU are well above the 3 per cent limit of budgetary deficit. In 2003, Poland's deficit was 4.1 per cent of GDP, the Czech Republic's 12.9 per cent and Hungary's 5.9 per cent. Cyprus had a shortfall of 6.3 per cent of GDP while Slovakia and Malta ran deficits of 3.6 per cent and 9.7 per cent of GDP respectively.

The Commission's official forecasts, which were last updated in April, predict all six countries will continue to top the EU's deficit limit this year and next, though the shortfalls are seen narrowing over that period. A number of these countries see their future in the euro and wish to be part of it by 2010, possibly hoping that by that time the world economy will be buoyant enough to carry even the eurozone countries along.

The new members were rapped over the budgets as the Daily Telegraph put it, and told to come back next time with coherent plans as to how they intend to lower those deficits.

Curiously enough, the same warning was not given in quite such a strong form to France or Germany, both of whom are likely to register a higher than 3 per cent deficit for the third and fourth year running. And at the same meeting of Finance Ministers that the report on the new member states was delivered, it was decided in the teeth of the Commission’s objections not to chastise Italy, whose deficit is over the supposed limit and is set to grow.

It's the economy, stupid

In a surprise announcement the French national statistics office, INSEE, stated that economic expansion in France has exceeded expectations in the first three months of the year. The forecast for growth of GDP had been 0.5 per cent but appears to be 0.8 per cent, up from 0.6 per cent from the last two quarters of 2003.

This has caused much rejoicing in the French government. Prime Minister Raffarin has announced that the French economy “has come back toward growth” and recently appointed Finance Minister Nicolas Sarkozy, still President Chirac’s potential successor said: “France is now in a position to play a bigger role in global growth.”

Others, in particular, what the International Herald Tribune calls “private economists” have been more cautious, pointing out that INSEE had not given a precise break-down of the components of the GDP growth, but seems to have relied on an increase in household spending. Unfortunately, the last three months coincided with the first of the twice-yearly sales in France and household spending always goes up at those times.

The strong euro is still making exports difficult and the French government is looking to ways of increasing domestic consumption. Nicolas Sarkozy has proposed that Sunday shopping hours should be extended – always contentious in France – and that individuals should be allowed to deduct up to 150€ in credit card repayment from their income tax. We shall have to see whether this proposals go through.

Meanwhile the OECD has announced that the economic outlook world-wide is good and getting better. It is particularly good in North America and Asia. But it has been lagging behind in Continental Europe. However, with its customary optimism the OECD envisages that “the rising tide of the world economy would lift the European boats”.

However, there is no getting away from the fact that the economies of the eurozone have been performing disappointingly. They are, as the OECD says, sluggish and seem unable to overcome their poor performance. The advice given to them is one we have heard many times before and consists essentially of greater flexibility in fiscal and labour policies and in mortgage and housing markets. The Chief Economist seems to have missed out on the importance of bi-annual sales in stores.

To read the statement made by Jean-Philippe Cotis, Chief Economist of OECD click here

Hypothetical scenarios

Update

More on that story about France and Germany seeking to go ahead with the constitution with only the support of twenty out of twenty five EU member states: asked by journalists for a reaction, the Prime Minister's Official Spokesman said that he never commented on hypothetical scenarios. "That said", he added, "it is not an idea that we would look upon with any particular favour".

The EU’s Commission has also weighed into the argument, pouring cold water on the idea. An official spokesman stressed that changes to the existing ratification rule must supported by all national capitals. “The rules stand as they stand and need to be applied as they are,” he said..

The Commission is backed by Ahern, who has stressed that there were no plans to propose change. "Unanimous ratification should continue to be required for treaty change," he said. "The presidency agrees with this approach and does not propose to bring forward any new initiative in this area. The key objective of the presidency is to achieve agreement on the new constitutional treaty."

There is some speculation, however, that Chirac – in particular – is speaking to a domestic audience. By raising the spectre of UK marginalisation or expulsion from the EU, Chirac is reminding his own colleagues of what could happen if Paris held and lost a referendum. He may be attempting to counter pressure for a referendum, after his own senior government ministers and political party backed a vote.

Dithering on the edges

The United States accounts for only one percent of Syrian exports, and US companies supply a mere five percent of imports to this country, accounting for a mere $300 million. By contrast, almost 60 percent of Syria’s trade is conducted with EU member states, of which the larger part is with France.

Guess, therefore, which country has just imposed economic sanctions on Syria, and which trading bloc has opposed the sanctions, led by which country?

There are no prizes, of course, for answering such childishly easy questions, but once again the current situation in Syria demonstrates that foreign policy and trade are intimate partners, the one conducted in the service of the other.

Thus, while the US – with minimal economic interests in the country - is racking up the ante by imposing sanctions on Syria for its record in supporting terrorism, the EU, very much guided by France, takes a wholly different view.

Far from backing the US in its world-wide crusade against terrorism, the EU’s Energy Commissioner Loyola de Palacio is heading to Damascus on Sunday to discuss connecting Syria to Europe’s energy market and developing the region’s oil, gas, electricity and transport sectors.

In contrast to the hard line policy of the US, the EU is insisting on maintaining a policy of “constructive engagement” with Syria and is seeking to bring it fully into an existing trade bloc with Mediterranean rim nations.

Bang in the middle, however, is Britain, which “shares America's concerns”. Blair wants to pursue a policy of "critical and constructive engagement", but he also wants “stronger commitments” from Syria in denouncing nuclear weapons programmes and weapons of mass destruction – which Syria has refused.

There lies a graphic illustration of the conflict at the heart of the EU’s common foreign policy. As long as French interests are involved, the policy will be tilted in favour of France, while Britain will remain torn between its “solidarity” with its EU “partners” and loyalty to its trans-Atlantic relationships – dithering on the edges of both.

Need there be any better example of why, for Britain, a common EU foreign policy can never work?

Bluster and bluff

According to the Financial Times, France and Germany have decided to raise the spectre of marginalisation or even possible expulsion for Britain from the EU if it fails to ratify the new constitutional treaty within two years.

To that effect, they intend to make a joint declaration today, "reviving" the idea that the constitution could be adopted if twenty out of twenty-five members agree, "leaving others facing a legal limbo or possible expulsion."

Nevertheless, the Financial Times reported that the proposal was "immediately denounced as unworkable by Britain", and "deemed unhelpful" by the Irish presidency. "However", the newspaper added, "it reflects frustration in France and Germany that a British referendum on the constitution could wreck a treaty which has been under construction for more than two years."

The unnamed British commentator is, of course, right. Not only does the constitutional treaty have to be ratified by all member states, the repeal of the existing treaties also requires unanimity.

Therefore, while it is theoretically possible for twenty countries already within the EU separately to agree a constitutional treaty, it would have to run side-by-side with the existing treaties. The EU is already complicated enough but to run two similar systems, but with different competences, different voting procedures, and variations in the legal bases, would be an organisational nightmare.

Perversely, such an arrangement could substantially strengthen Britain’s position as one way to resolve the conflict would be to ask Britain to leave, to which she would have to agree. This could enable her to negotiate a highly favourable "exit package", securing trading and other agreements without having to be bound by the increasing burden of EU law and restrictive policies.

Clearly, neither the French or Germans have thought this through – or perhaps they have. Either way, according to the FT, a German government official has announced that "France and Germany would publish the proposal at a joint cabinet meeting by ministers from both countries in Paris". Both countries wanted to see the final text of the constitution include a ratification clause based on an existing proposal covering future amendments to the constitution.

This proposal, already familiar and subject to heated debate amongst Eurosceptics, allows for future amendments to the constitution which are not ratified by 80 percent of the member states within two years, to be referred to the European Council. "Therefore", said the unnamed German official, "the question is going to be whether one finds a wording like this, possibly a more substantial wording, for the ratification process that's about to begin and can pass it in the European Council."

However, this is the legal equivalent of pulling yourself up by your own bootstraps. No party to a treaty can be bound by that treaty until or unless it has been ratified by all parties. Thus, Britain can veto any such proposal. British officials have been quick to point this out.

On the other hand, there may be a more sinister agenda. French officials have suggested that the Franco-German move might help Mr Blair win a referendum, by focusing the minds of British people on the dire consequences of a "no" vote. But the FT reports that this idea "was greeted with mirth by British diplomats". Ireland urged all sides to get down to the business of agreeing the final text of the treaty."

The fact that it is even being considered by the Franco-German, however, perhaps suggests a level of desperation. All parties are aware that the failure of the ratification process could spell the end of the European "project" as we know it. But it has come to a pretty pass when all that the great Franco-German axis can offer is bluster and bluff.

Wednesday, May 12, 2004

Taxation "red line" – a figment of the Government’s imagination

Yesterday, their Lordships held a formal debate on the EU constitution. The full debate transcript runs to 72 pages (in Word format), so its is difficult to summarise the whole debate and do it justice. As an alternative, therefore, we propose to publish edited highlights from the key speeches. The first of these extracts, from Baroness Noakes on direct taxation by the EU, makes compulsive reading.

The Baroness opens with an apology for her ignorance of more general EU matters, but then tells the noble Lords that she intend to cover her “more natural territory” taxation and economic policy. On this, she is very far from ignorant. She continues:


The Government have often asserted that taxation is a red line area. For example, the Prime Minister said:

"Issues to do with taxation . . . will remain the prerogative of our national Government and Parliament".—[Official Report, Commons, 25/6/03; col. 707.]

But such statements, like so many that relate to the draft constitution are at best harmless spin and at worst positively misleading.

Article 93 of the treaty on European Union deals explicitly with harmonisation of indirect taxation and that requires unanimity. To date, we have managed to keep several of our very important derogations, despite a number of attempts by the Commission to take them away from us. We have our veto and it is clearly important that it is retained. But there is no specific reference to direct taxation in Article 93 or elsewhere in the treaty, so there is no explicit veto at present. When the Prime Minister said a few weeks ago that:

"The national veto must remain in areas such as taxation".—[Official Report, Commons, 20/4/04; col. 155.]

he could not have been referring to direct taxation since no veto exists. He was perhaps using "veto" in a colloquial sense but that is, in my view, misleading.

It is generally argued in relation to direct taxation that the fact that there is no reference in the EU treaty means that there is no competence for the EU and there being no competence there is no need for a veto. That is very nice theory but it is not the position in practice, which is why accepting the draft constitution does not achieve the strong defence of the UK's position in relation to direct taxation that the Government would have us believe.

The commission has long had ambitions to get its hands on direct taxation. It has tried several times since the 1970s to introduce directives to harmonise various aspect of income tax and corporation tax. Fortunately, it has failed to date but it has not given up. One example is its formal opinion on the draft constitution last year, which made clear its ambitions for a more precise demarcation of the Union's authority in relation to taxation. For "more precise demarcation" we have to read "more power to the commission".

It is against this backdrop that the UK Government's apparent defence of their taxation powers needs to be examined. The most important current threat to our taxation autonomy is the European Court of Justice. The lack of reference to direct taxation in the EU treaty would reasonably lead to the conclusion that the ECJ has no role.

But the ECJ has embarked on a stealthy extension of its jurisdiction, under the cover of enforcing fundamental freedoms in EU law. In particular, Article 43, which deals with the freedom of establishment, has been used as a Trojan horse to attack national tax laws. The ECJ has only really got going on this in the past 10 years and there have been several cases where UK tax law has been found to be in breach of EU law, forcing a change in our law. It started with a case brought by ICI and, for the sake of form, I declare an interest as a director of that company.

It was a case on consortium relief that cost British taxpayers quite a lot of money. Recently, the Chancellor had to devote a great chunk of this year's Finance Bill to introducing a raft of bureaucratic and costly intra-UK transfer pricing rules following the German case of Lankhorst Hohorst. Most professional advisors think that a lot more UK tax law will need to change in the wake of that decision and there are many other cases in the pipeline.

Against that background, the lack of formal competence of the EU in direct taxation matters looks like a side show. If the Government are serious about taxation remaining a prerogative of the government and Parliament it is not a question of defending existing EU treaty provisions. It actually requires a change to the treaty to ensure that the ECJ cannot interfere through the back door in matters for which they have no entry rights through the front door.

The draft constitution does not appear to tackle tax directly and that is what the Government appear to be pledging to uphold. But there is one area of the draft constitution that holds massive dangers both to our fiscal freedoms and to our economic freedoms. Article 14 deals with the co-ordination of the economic policies of member states…

This is another Trojan horse. Economic policy cannot be separated from taxation policy. It would, I assume, cover the overall level of taxation and quite possibly some detailed provisions. The very lack of definition of what is meant by "co-ordination of economic policy" should be a cause for major concern.

Article 14 is not merely for those who want to join the euro-zone. That club already has economic rules, as we know. With the growth and stability pact they are observed in the breach as much as in the observance. Euro-zone countries should already be on notice that they are on the slippery path to tax harmonisation. Former commissioner Solbes is reported to have said that member states within the euro-zone cannot be allowed to pursue whatever tax and spending policies they want after joining the euro. The danger in Article 14 is that the rest of Europe, and in particular the UK, will be sucked into that abyss.

The Government's talk of red lines in taxation is misleading. Our country is already in danger of losing taxation powers through existing treaty rules and will be further at risk if Article 14 is allowed to remain in the final constitution. What we actually need is a robust and unequivocal statement of the commission's lack of competence in relation to national taxation matters, coupled with the ECJ being firmly removed from this territory.

Anything less than that will show that the Government's red line on taxation is no more than a figment of their imagination.

To read the whole debate, click here.

Poland – not in the bag

Sources: Deutsche Welle and our own correspondent

Despite assumptions that Poland will come into line, alongside Spain, on the EU constitution, the indications are that this is far from certain. What should start alarm bells ringing is the extraordinarily ambiguous interview with the Polish foreign minister Wlodzimierz Cimoszewicz, published by Deutsche Welle today.

Cimoszewicz is saying that, although Poland "hasn't ruled out acceptance of the double majority system, it still wants a system closer to the Nice Treaty". He said Poland would consider whatever compromise solution the Irish government puts forward at the next EU summit in June.

But what is fascinating to Kremlin (oops, sorry) EU-watchers are these comments: "We still believe that it's possible to have the issue resolved by the end of June, before the Irish presidency expires… But I also don't want to create the illusion that it's going to be easy, or that the problem is already solved - it isn't."

This is very far from an unequivocal acceptance of the constitution, as it currently stands, with Ahern as yet not having made any new proposals on the contentious voting rights arrangements. Crucially, though, Cimoszewicz is talking about a possible agreement by the end of June, which is after the 17-18 June deadline, when the new treaty is supposed to be agreed.

No doubt, in making these guarded statements, Cimoszewicz is keeping a very close eye on domestic opinion. Although prime minister Miller has stepped down on 2 May, to be replaced by Marek Belka (Belka, loosely translated from the Polish as meaning "plank", as in "thick as two short Belkas"), the change is widely seen in Poland as a cynical game of musical chairs.

President Kwasniewski, Miller and Belka are all from the same social democrat party (SLD), and Belka moves over after failing, as finance minister, to get approval for an ambitious financial restructuring plan. Thus, he is no more popular than Miller – and that means very unpopular, with less than ten percent approval ratings. The fact that the Belka government has seven of the ministerial team that formed the Miller government also adds to the sense of disillusionment.

And, on 14 May, a mere three days before he is due in Dublin for the IGC summit, Belka has to face a crucial vote in the Polish Parliament on his new government’s plans to deal with a growing financial crisis. At the moment, he is 30 votes short of a majority. If he fails, he and his party could be facing a general election earlier than autumn 2005, when it is currently scheduled – something which the political elites are anxious to avoid.

With the more popular Eurosceptic Self Defence Party and the League of Polish Families snapping at his heels, now is not the time for Belka to be at all generous to the European Union.

This is especially the case as the accession referendum was fought on the Nice deal, and memories are long in Poland. Altogether, therefore, Poland could remain the "wild card". It is by no means certain that its vote is in the bag. And, from Cimoszewicz’s remarks to Deutsche Welle, it does not look as if he is expecting any final decision at the June summit.

A new fog of uncertainty

Updated - see last paras

It is truly a measure of the inadequacy of our media that they seem to have opted out of reporting on the EU constitution, just as EU Observer, with its base in Brussels at the heart of the monster, is excitedly reporting "constitution negotiations reach fever pitch".

Thus, while the mainstream British newspapers devote their headlines to the appalling situation in Iraq, developments closer to home have gone unnoticed.

What we are able to glean is that there was, apparently, an enormous bust-up between Brown and the "colleagues", with our Gordon insisting on the status quo ante, before the new Irish presidency draft appeared on the scene. And, more or less to confirm this, Baroness Symons, in the Lords debate last night announced that another "working document" would be produced by the presidency in advance of the foreign ministers’ meeting of 17-18 May.

Small wonder, therefore, that Lord Howell, responding for the Conservative opposition, spoke of a "new fog of uncertainty". "We have read in recent days about a whole string of new red lines and extra demands to which the Government say they will stick", he said.

Reflecting the increasingly confused situation, he added, "This lacks clarity because we were told last December that all the red lines had been agreed in essence, so it was merely a question of tying up ends. It now appears there are a whole lot of new red lines".

This confusion is mirrored by EU Observer, which notes that Brown is refusing to allow the European Parliament to have the final say over the EU budget – a power which was slipped into the new Irish draft - not taking away member states' veto on the multi-annual budget and not giving the European Commission power to start procedures against member states on the stability pact without the consent of finance ministers.

But, says EU Observer, "the water has become muddied since then and some member states claimed on Tuesday that they were not sure whether all of these proposals had been agreed unanimously".

The Irish EU Presidency will now draw up a "shortlist" of those issues where finance ministers can agree, said Irish finance minister Charlie McCreevy. But a diplomat from a large country, now says that "it is not clear when the list will be ready and to whom it will go". McCreevy, meanwhile, is unable to say on which issues finance ministers would be able to agree.

As before, however, the Irish are sticking to their mantra that all the issues are linked: "nothing is agreed until everything is agreed". At this stage, though, the number of issues on which there is disagreement should reducing, whereas new areas seem to be opening up every day. To deal with them, foreign ministers have not ruled out a further meeting in May.

The result of any such deliberations will, of course, produce yet another draft of the constitution – or "working document" as the Irish prefer to call it – bringing the timing perilously close to the supposedly final IGC summit on 17-18 June.

As it stands, it would be very foolish to predict that there will be agreement at the summit – or even that the summit will take place. More and more, it is looking like the baton will have to be passed to the Dutch presidency, which starts on 1 July, with a final summit rescheduled for mid December.

This sentiment seems to be being voiced in Whitehall as well where, according to the Guardian, "there are now influential voices suggesting it may be better to drag the talks out beyond next month's deadline, though that would be an embarrassing failure for the EU, especially just after its biggest ever enlargement".

The Guardian also confirms that Ahern is "holding intensive talks to try to bridge the gaps". Success may well be slipping from his grasp.

"Sensible" budget deficit rules, i.e. none at all

Italy is also about to exceed the EU budget deficit rules, which state that this should not exceed 3 per cent. This year Italy will have a deficit of 3.2 per cent, despite an official prediction that she will stay within the allowed limits. By 2005 the deficit is likely to rise to 4 per cent.

Six of the twelve eurozone countries have exceeded the limit. These include Germany and France.

The Commission urged the assembled finance ministers to send Italy a letter of reprimand and, to be fair, that is what the rules say. The Commission, as guardian of rules and regulations as well as treaties is in the right. Alas, for good intentions. The finance ministers have decided to postpone the letter till the next meeting in early July, though why they think the situation should change by then is a mystery.

The odd thing is that all the finance ministers, the Italian Giulio Tremonti, the Irish Charlie McCreevy, the German Hans Eichel, and presumably others, all say that they consider the rules and the Growth and Stability Pact to be very good ideas and they all intend to abide by them. But not yet, they explain, unconsciously echoing St Augustine.

Hans Eichel, for instance, acknowledged that Germany will probably break the rules for the fourth year running. In the light of all this, he has called for a “sensible” interpretation of the rules. It looks like the only interpretation that would be sensible enough for him is to allow them all to lapse for the western countries but to be called into effect when the newcomers need to be chastised.

Brown expects…

After Falconer and Blair, to add to sundry others, along comes Gordon Brown with his own contribution to the fantasy politics that New Labour seem now to find more appealing than the real thing.

According to the said Mr Brown, he expects the “yes” campaign to win the referendum if Britain secures 'red line' issues in the constitution talks. "If we secure a treaty that is successful for Britain.... I believe we can successfully put it to the British people," he told journalists at a meeting of EU finance ministers in Brussels on Tuesday.

It really must be something they put in the tea.

With nothing to offer by way of coherent argument, Brown then repeated the lame and increasingly tedious manta that seems now to serve as the multi-purpose slogan for the yessites. He did not want to "isolate" Britain from Europe. Now there’s a thing. What is he afraid of – someone creeping in overnight and towing Britain into the Atlantic?

No sooner than that was said, Brown again retreated into the comforting fantasy of the Blairite vision of Europe, telling everyone at large that the UK was “gaining support for its firm line on tax, defence and social security”.

And what was the Irish presidency proposal, Mr Brown – Scotch mist?

But what exactly went on at the Finance meeting, we shall never know. Like North Korea, we have a legislature here which meets in secret. For the moment, he can tell us anything he wants to and we have no means of checking.

Stay tuned, however, for a report on the House of Lords debate on the EU constitution later today.

Tuesday, May 11, 2004

Drop in support for enlargement

Enlargement has gone down like a lead balloon with the majority of people in the EU, according to the latests Eurobarometer survey. Overall support stands at 42 percent in the EU-15, down five percent since the last survey in autumn 2003.

Predictably, after the widely publicised fears of mass immigration, support has fallen seven percent in the UK. Border countries are especially affected with support dropping from 38 percent to 28 percent in Germany. Austria is down seven percent, and Italy five. But the Netherlands also shows a fall of Netherlands six percent, while support in communautaire Luxemburg has dropped eight percent.

Only in three of the EU-15 countries has public opinion improved: Finland, up three percent, and Greece and Ireland each up one percent.

The EurActive web site, which announces the survey, includes a patronising comment from Hendrik Voos, Professor of European affairs at Gent University. He says, "Politicians have not managed to explain correctly what the enlargement means," said . "The fears of the population are unjustified. There are more advantages than disadvantages in enlargement."

It is remarkable how, whenever people are opposed to anything the EU does, it is because they are ignorant and need to be taken aside by politicians to be re-educated.

To see the full Eurobarometer report, which covers a wide range of issues click here.

Whatever happened to ....

… the once mighty German economy, the motor of Europe? It seems to have become somewhat rusty. The Wall Street Journal Europe in its editorial today (May 10) points out that “[w]ithin one week, the German government went from Keynesian deficit spending to a bizarre mix of supply-side economics and tax hikes and back to the current muddle of tinkering with some minor reforms”.

The problem lies in that curious push-me-pull-you that is the German red-green coalition cabinet. The two parts keep falling out, disagreeing, coming up with different policies and it is left to Finance Minister Eichel to make some sort of a sense of it all. Mostly, there are suggestions of higher taxation, a fatuous idea, since German taxes are among the highest in Europe and it avails them little.

Unemployment is at 4.4 million and the growth forecast has once again been cut to 1.5 per cent after two years of stagnation. The federal budget will most likely break the EU deficit limit for the fourth year in a row. The famed Growth and Stability Pact, a German idea in the first place, is a dead letter as far as Germany is concerned.

Schröder has proposed the odd reform but, mild though these are, they have upset the traditionalists in his party. So he has pushed through one new initiative recently – the only one for months. There is now a law that says companies that do not offer enough training programmes for young job seekers can be fined. This law is likely to add ever more layers of bureaucracy. And, what is more, it will apply to companies that cannot afford to offer training, being too small, and those that offer it but cannot find enough takers.

On the other hand, it is probably slightly more sensible than Schröder’s other proposal, which is to tax brothels. It is not known precisely how much that would raise but the sum is unlikely to be sufficient to set the spluttering motor running again.

Schröder’s Social-Democrats are expected to do rather badly in the forthcoming European and regional elections. The Chancellor may well be another leader to go to the Summit in Dublin, badly mauled by his own electorate just a few days before that.

And they're off

Well sort of. Le Monde reports that parties of the right and the left have launched their election campaigns on May 9, rather half-heartedly described as Europe Day. This was the day on which in 1950 Robert Schuman, the French Foreign Minister, broadcast on French radio Jean Monnet’s plan for uniting Europe or, at least, the production of coal and steel, to ensure that Germany would never again be more powerful than France.

By Europe, he meant western Europe. Over in the east, May 9 was celebrated with all pomp and circumstance, as well as vast amount of heavy armoury as the Soviet Victory Day. And now, they launch lacklustre election campaigns.

Two months ago the right was severely beaten in the local elections and Chirac hastily reorganized his cabinet, hoping that would appeal to the electorate. We shall see whether he was right on June 13. Or will he be yet another European leader to be mauled by his electorate just a few days before the crucial Summit that will, supposedly, agree on or, at least, discuss the new Constitution.

The same newspaper reports that an ambitious plan was due to be unveiled on May 10 for upgrading Waterloo (the town rather than the station) as an intenational tourist attraction. It was after all, as the correspondent points out, the scene of one of the most famous battles of European history. Around 300,000 soldiers fell in one day. And what was the day? Well, funny you should mention that. It was June 18, 1815. The next deadline for an agreement on the EU Constitution is June 18, 2004. An interesting day to pick.

Where is Marshal Blücher, now that we need him?