Europe's identity crisis deepens

Jun 18th 2005
From The Economist Global Agenda

The European Union summit has broken up with a deal on the constitution that means different things to different leaders, and no agreement on the EU's budget at all. Even the summit's Europhilic chairman, Jean-Claude Juncker, admitted that Europe has slipped into a “deep crisis”

EUROPEAN UNION leaders, arriving in Brussels on Thursday June 16th for a summit meeting, agreed on one key point: with the EU in crisis, the leaders of its 25 member states badly needed to show that the Union can still work. If that was the mission, the summit backfired spectacularly. Around midnight on Friday, the meeting broke up in acrimony and disagreement. Jean-Claude Juncker, the prime minister of Luxembourg, who had been chairing the summit, told journalists that Europe is now in “deep crisis”. Jacques Chirac, the president of France, echoed these words and placed the blame for the meeting’s failure squarely on Britain and its prime minister, Tony Blair, whom he accused of “national egoism”. A visibly angry Mr Blair used his closing press conference to shoot back at French accusations that Britain lacked a “European spirit”, saying pointedly that “Europe isn’t owned by anybody”. He demanded a fundamental debate about the future priorities of the EU.

The summit's eventual implosion was caused by arguments over the financing of the EU budget for 2007-13. But the budget was only one of two central issues facing the Union going into the summit, and in some ways the less important. Arguments about the budget, although often bitter, have been a regular feature of European politics for many years. Far more profound issues are raised by the rejection of the proposed new constitution for the EU in recent referendums in France and the Netherlands. These votes, in countries which have traditionally been fundamental to the drive for European unity, raised deep questions both about the political legitimacy of the EU, and its underlying purpose. Yet, going into the summit, the budget and the constitutional questions had become linked. Seeking to bounce back from his political humiliation at home, Mr Chirac had chosen to go on the offensive against “the British cheque”—the rebate that Britain has enjoyed on its contributions to the European budget since the mid-1980s, when Margaret Thatcher insisted on having some of her money back.

The leaders claimed to have reached a deal on the constitution at the summit—but it does not withstand inspection. Mr Juncker claimed that the constitution is still alive, and might indeed still come into force. He also argued that the document was a carefully balanced compromise and could not be amended—despite the negative verdicts of the French and Dutch voters, who he claimed had been confused. But at the same time he announced that there would be a pause in the ratification process, to allow a broader debate among European citizens. It is clear that in Mr Juncker’s mind—and he was supported in his arguments by the presidents of the European Commission and the European Parliament—there can only be one acceptable outcome of this debate: eventual ratification of the constitution.

But Mr Juncker’s arguments are deeply unrealistic—not to mention arguably undemocratic. The Dutch prime minister, for example, made it clear at the summit that his country would not vote again on the same, unamended constitution. European federalists like Mr Juncker still cling to the hope that pressure might be applied to France and the Netherlands by a succession of ratifications in the other 23 EU countries. But this too seems highly unlikely. Several countries used the summit to make it clear that they are deferring planned referendums or parliamentary ratifications of the constitution into the indefinite future: Denmark has put off a referendum scheduled for September, and Portugal, Ireland, Britain and the Czech Republic have all put similar plans on hold. Even Mr Juncker’s own Europhilic duchy, Luxembourg, may abandon the vote it had scheduled for July 10th. Jack Straw, the British foreign secretary, argues that the longer the constitution is put in the deep freeze, the harder it will be to revive it. And despite Mr Juncker’s protestations, that seems realistic.

The row over the budget burst open much more visibly. Although the details of the argument involve arcane formulae, the basic outlines are straightforward. At present, Britain gets two-thirds of its net contribution to the EU budget paid back as a rebate—despite this, as the British frequently point out, their country is still the second-largest net contributor to the budget, largely because it has a small farm sector and farms get more than 40% of EU spending through the common agricultural policy (CAP). France argues that the 20-year-old rebate is now an anachronism, because Britain has grown richer in recent years and farm spending has shrunk as a proportion of the EU budget. Going into the summit, Mr Chirac demanded the abolition of the rebate, claiming that otherwise Britain would not pay its fair share of the cost of enlarging the EU. Mr Blair’s response was that the rebate remains justified. He said that it could only be scrapped or cut back in the context of a full-scale reform of the CAP—something Mr Chirac refused to consider.

That was the argument going into the summit, and it remained the argument at the end of the meeting. Mr Juncker tried various forms of compromise, including a nominal freeze on the British rebate, which is scheduled to grow as the EU budget grows. But the British were not prepared to accept this without a cast-iron guarantee of CAP reform. Although EU officials repeatedly warned Mr Juncker that there was no deal to be had—and that he was merely worsening the situation by continuing the discussions—the Luxembourgeois prime minister pressed on. Towards the end of the evening, his main goal appeared to be to isolate Britain, rather than to secure a genuine budget agreement.

Yet he failed, even in this. In the final discussions five countries—Britain, Sweden, the Netherlands, Finland and Spain—all declared that they could not accept Mr Juncker’s last proposal. The Swedes and the Dutch pay, on a per-capita basis, even more into the EU budget than Britain does. After his own defeat in the Dutch referendum, Jan-Peter Balkenende, the prime minister, was more or less compelled to argue for a better financial deal for his own country. For his pains, he too was accused of “national egoism” by the French and German leaders.

In truth, the EU does not absolutely need to get its 2007-13 budget firmly into place until the end of 2006. Arguably, it never really needed a new constitution. The acrimony unleashed by the arguments over the budget and constitution may ultimately end up doing more long-term damage to Europe than the failure to reach an agreement.

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