Fear and Loathing in Brussels

Maybe April is the cruellest month, but May and June haven’t been so great for the European Union, either. First there was the collapse of the EU Constitutional process at the hands of the French and the Dutch. And now there is a budgetary debacle that redoubles the perception that the “European project” is in crisis.

In short, negotiations over the EU’s seven-year budget crashed under the anger and recriminations over the state of Europe. The immediate problem was a bitter argument between France and Britain. France wanted Britain to decrease some of the $6 billion it receives in a rebate each year from the EU. According to Chirac “The United Kingdom refused to contribute its fair and reasonable share to the cost of enlargement.” Moreover, as the NY Times reported on Saturday:

Germany’s chancellor, Gerhard Schröder, stood behind Mr. Chirac. He attributed the impasse to “the stubbornness” of Britain and the Netherlands, and in particular he accused Britain of “not helping the new countries.”

The UK, for its part, responded that it would not do so until France was willing to decrease the $13 billion it receives each year from the EU in agricultural subsidies. This is not open to debate as far as France is concerned.

Of course the debate is really about much more than this. In part, what was really going on is a blame game over the current state of European affairs. France’s President Chirac is probably trying to deflect some of the heat he’s facing over France’s “No” vote by focusing on Britain’s refusal to reduce its payments from the EU. This aspect led to the embarrassing turn of events that the ten newest members of the EU (largely relatively poor from Eastern and Southern Europe) agreed to give up some of their EU aid to help balance the budget and allow the rich countries to keep receiving most of their EU aid. Let’s repeat that: the poorest countries would give up some of their EU benefits so that the richest could keep theirs. According to the Sunday edition of the NY Times:

…for the older members, it was a humiliation. “When I heard one after the other, all the new member states – each poorer than the other – say that in the interest of an agreement they would be ready to renounce part of the money they are due, I was ashamed,” Jean-Claude Juncker, Luxembourg’s prime minister and the departing European Union president, told journalists after talks collapsed.

But no one was ashamed enough to actually accept the deal.

That is because this argument is not just about money. It is about defining what the EU will look like now that so much is up for grabs after the collapse of the draft constitution.

Tony Blair wants to push Europe away from the statist “social” model of Europe preferred by the Continental powers. France and Germany are trying to keep alive the system of financial redistribution and a social safety net (remember much of the French “No” vote was attributable to fears that the draft constitution was too “Anglo-Saxon” and not “social” enough).

And now Luxembourg, one of the champions of the social model, is leaving the EU rotating presidency and the presidency is being passed to… Britain. But I don’t know how much one can expect in terms of a new direction for the EU. While Tony Blair is supposedly working up a comprehensive vision to revitalize the EU with more market-oriented policies, according to the NY Times,

…the feelings against Britain among some other members are so raw that even Mr. Juncker, who is passionate about collegiality, said that he would “not be listening” when Mr. Blair outlines his priorities to the European Parliament next week. He said he would hand over the presidency “without comment and without advice, because clearly my advice is not appreciated.”

Regardless as to whether they listen to each other or not, this is a defining moment for Europe. I think that some form of deeper European integration is probable (largely due to the monetary union that has already occurred) but whether significant deepening is delayed by a decade or two may be decided by what Tony Blair, Jacques Chirac, and Gerard Schroder do in the next year.