Of principle and pragmatism

The European Union summit

Jun 23rd 2005 BRUSSELS
From The Economist print edition

Death to the constitution, but watch out for another grubby deal on the EU budget

TONY BLAIR will next week take over the presidency of the European Union for six months. For Britain's prime minister, the timing is awkward, but also opportune. On the one hand, Mr Blair's relations with other leaders (notably France's Jacques Chirac) have hit a new low, after a vicious row about the EU budget. That will make it hard for Mr Blair even to pretend to play the role of impartial chairman. On the other, the EU is in disarray and looking for new ideas and leadership. Could this be the moment when Mr Blair finally seizes control of the European agenda?

Whatever their differences, Europe's leaders agreed, after the summit collapsed at midnight on June 17th, that the EU is in a mess. Jean-Claude Juncker, prime minister of Luxembourg, who chaired the meeting, declared that Europe was in “deep crisis”. Mr Chirac echoed these words and placed the blame squarely on Mr Blair, whom he accused of “egoism”. A visibly angry Mr Blair shot back at French accusations that Britain lacked a European spirit, saying pointedly that “Europe isn't owned by anybody.” He demanded a fundamental debate on the EU's future priorities.

Will Mr Blair use his presidency to pursue this debate? Probably not. The British position on the budget is a mixture of genuine principle and tactical manoeuvring. There is no doubting Mr Blair's sincerity when he argues that it is absurd of the EU to devote almost half its annual budget of €110 billion ($130 billion) to subsidising farmers, who make up less than 5% of the population. The British have long detested the common agricultural policy (CAP). They know there is support for switching the budget to more “modern” priorities. At the end of the summit five countries—Britain, the Netherlands, Sweden, Finland and Spain—rejected the compromise put forward by Mr Juncker. Encouragingly for Mr Blair, the German opposition, which should win elections in September, is sympathetic to the idea of EU budget reform.

Yet the British ratcheted up the pressure for further reform of the CAP only when it became clear that Mr Chirac was determined to assault the rebate that returns to Britain some two-thirds of its net contributions to the EU budget. It seems that, if the French point a gun at the rebate, the British will do the same to the CAP. If Mr Chirac dropped his objections to the rebate, Mr Blair's demands for a review of farm subsidies would subside. In fact, because both France and Britain have made such a fuss, neither can now back down completely.

The outlines of a deal are clear. The British will keep most of their rebate; in return, they will get a commitment to a review of the CAP, perhaps in 2009 or so. Fans of Mr Blair will be disappointed if he accepts such a business-as-usual deal, which he denounced in the House of Commons as the usual EU fudge “cobbled together in the early hours of the morning”. But Mr Blair knows the central Europeans are upset that a budget promising them billions has been delayed—and that they hate seeming to pay towards the rebate. He knows too that if a budget deal for 2007-13 is to be done in the next 12 months, the present proposal, which still devotes 40% of spending to agriculture, cannot be totally recast. The CAP might be cut—a plan to reform the sugar regime is a good start — but not to 5% of the budget.

Mr Blair has, in any case, modified his defence of the rebate. This week he conceded that it was “an anomaly that has to go”. That realism reflects how it will evolve. Britain now pays two-and-a-half times as much as France, in net terms. But if the rebate is unchanged, it will become only the ninth-largest net contributor, as a share of national income—below France, Italy and Germany, even though Britain is richer than all three.

The British prime minister has already indicated that he is prepared to give ground, and the haggling over numbers is well advanced. One diplomat says that at the summit Britain was offered a deal that would have cost it €30 billion over six years; then a deal costing €18 billion. Mr Blair countered with an offer to reduce the rebate by about €5 billion. So the final cut is likely to fall somewhere between €5 billion and €18 billion. And the higher the price Britain has to pay, the tougher it will be in its demands for a genuine, early review of CAP spending.

Although it was the budget that led to easily the bitterest rows at the summit, much of the anger and despair was actually about something quite different: the rejection of the proposed EU constitution by French and Dutch voters. Unlike rows about the budget, the constitutional rejection raises profound questions about the EU's legitimacy and underlying purpose.

EU leaders' claims to have agreed on the constitution at the summit look threadbare. Mr Juncker still insists that the constitution is alive, and might indeed come into force one day (see Charlemagne). At the same time he announced 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 by the presidents of both the commission and the European Parliament), there can be only one acceptable outcome of this debate: eventual ratification of the constitution.

But Mr Juncker's arguments are as unrealistic as they are undemocratic. He is clinging to the hope that pressure might be applied to the French and the Dutch to vote again, after a series of ratifications by other EU members. That is surely unlikely. A succession of countries have made clear that they are deferring planned referendums or parliamentary ratifications indefinitely.
Denmark, Portugal, Britain, Poland and the Czech Republic have all put their referendums on hold. Only Mr Juncker's Luxembourg has decided, after much hesitation, to press ahead with a vote, on July 10th. Despite the grand duchy's moral authority in matters European, a positive verdict from its 200,000 voters, which is no certainty, is unlikely to be enough to rescue the constitution.

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