When voters in France and the Netherlands turned down the proposal for a Constitution for the EU, the world knew that the European project was in deep trouble. Last week's bruising battle over the medium-term future of the Union's budget has confirmed that verdict with a vengeance. It also brought to a sorry close the UK's six-month presidency of the European Council, confirming Britain's long-standing reputation as the odd-man-out in the EU.
The two events are intimately connected. French and Dutch voters did not say why they voted against the planned Constitution. But many commentators believe that they were protesting against what they perceived as the precipitate admission of ten new member states, mainly much poorer countries from Central and Eastern Europe. In particular, voters were afraid that their jobs would be lost to hordes of Eastern immigrants, exemplified in the image widely quoted at the time, of the low-cost Polish plumber.
The irony, of course, was that most of the 15 old member states had refused to give the new members full and immediate access to the Western job markets. But in any event, it was too late to protest: the ten Eastern states had already been granted membership of the Union.
But now the 25 member states must deal with the financial consequences of that enlargement, not just in the overall size of the EU budget for the next seven years, but in who pays and who benefits. In particular, the central issue is how far the old member states are willing to pay to boost the less developed economies of the new members.
In the event, it turned into a three-way battle between Britain, France and the new member states. Traditionally, a large majority of the budget has gone either on agriculture or on the development of backward regions. In practice, this has meant large flows of money either to big agricultural producers, like France, or to poorer member states, like Greece and Portugal. On both counts, the new member states expected to benefit substantially from the EU system.
In the past, the big loser from the EU system, in budgetary terms, was the UK; for while agriculture accounted for two thirds of all EU spending, the UK had a small farm sector, and therefore received small farm payments. The British long complained of the unfairness of these rules, especially in view of the fact that the UK was one of the relatively poorer member states; and in 1984, Margaret Thatcher's Conservative government demanded, and got, a massive rebate on its net contribution to the EU budget.
Today, the situation has changed in three important respects. EU farm policy has started to be reformed, and its share of the EU budget has fallen from over 60 percent to 40 percent; Britain has for several years enjoyed significantly faster economic growth than most other member states, so that it is now one of the richer EU countries, even compared with France and Germany; and the new member states are so much poorer than even the poorest of the old members, that they have an unanswerable moral case for a generous share of whatever budget could be negotiated.
When negotiations started six months ago, it was Britain's turn to take over the Presidency of the European Council.
The British Prime Minister, Tony Blair, electrified the world of European politics by telling the European Parliament that he was a "passionate pro-European." This was a message for which Britain's European friends had long been hoping, and for which they had waited in vain since Blair's election in 1997. Certainly, he had never expressed any such sentiment inside the British Isles during the previous eight years.
Since Britain had been one of the most insistent advocates of enlargement of the EU to the candidates from Central and Eastern Europe, one might have expected that the Blair government would have wished to be correspondingly generous to the new-comers in the conduct of the budgetary negotiations.
At first, this seemed to be the British government's chosen tactic. Against all expectations, it struck a morally advantageous posture by offering to surrender some part of its budget rebate, but only if the rest of the EU (i.e. France, in particular) would agree to fundamental reforms of EU farm policy.
It took some time before the British came to understand that since President Jacques Chirac is a beleaguered lame-duck President, who will remain in office but not in power until 2007, he is in no position to agree to any such bargain.
So when the British came to terms with this harsh reality, they played out the lamentable end-game of their management of the negotiations with small-minded cheese-paring and logic-chopping offers, all designed primarily to safeguard narrow British interests, mainly at the expense of the new member states.
It is a sad conclusion to a presidency, launched six-months ago, with Blair's claim that he was a "passionate pro-European." Yet the full text of his speech tells it all. Blair is in favor of Europe; but not this Europe. He wants to be a part of a political Europe; but only if the other member states follow Britain's model of economic and social reform.
The problem is that economic and social reform are purely national responsibilities, and do not lie within the competence of the Union; if there is to be economic and social reform in France and Germany, that is a matter exclusively for French and German voters and politicians. It could only be a European matter, if the EU were a real federation.
Is Blair a federalist, then? Heavens, no! He is merely an unthinking nationalist, living in terror of the nationalist tabloid press. So why does he say he is a passionate pro-European? Because he has not thought about the question for one moment.
Ian Davidson is a fellow for the Centre for Policy Reform in Brussels, and a former columnist for the Financial Times.
Copyright: Project Syndicate
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