What the summit says about the EU

by Katinka Barysch

At 4.30am on Saturday 23rd June, after 36 hours of wrangling, EU leaders agreed on a deal to revive parts of the failed EU constitutional treaty. The biggest changes will concern not the transfer of powers from the member-states to EU institutions, but the way the Union functions. They are:

* A semi-permanent president of the Council will replace the 6-monthly rotating presidency. The various formations of the Council of Ministers will still be chaired by the rotating presidency.

* The exception is the Council of Foreign Ministers, which will be chaired by the new High Representative for EU Foreign and Security Policy (this post is a merger of those held by the current High Representative, Javier Solana, and the commissioner for external relations, Benita Ferrero-Waldner).

* A new double-majority voting system for the Council of Ministers, under which a decision is passed when it is backed by 55% of the members-states, so long as these represent 65% of the EU’s population.

* The powers of both national parliaments and the European Parliament in EU law-making will be strengthened.

*From 2014 onwards, the Commission will only have 18 members (the seats will rotate among the 28 EU member-states, with Croatia likely to join before 2014).

This summit was the most critical meeting of EU leaders since the 2004 enlargement and the 2005 failure of the constitutional treaty. It is therefore interesting to look at what the negotiations and the outcome say about the state of the Union.

Germany

The summit confirmed Angela Merkel's role as Europe’s star politician. Few doubted that she had the ability to get a deal, following her success at the EU’s March summit on climate change and the G8 meeting earlier in June. However, the Brussels summit was a particularly difficult balancing act. Merkel not only needed a successful conclusion to the German EU presidency. She also needed to save the grand coalition between her Christian Democrats (CDU) and the Social Democratic Party (SPD). In the week preceding the summit, the coalition had come to the brink of collapse over plans to introduce a general minimum wage in Germany.

Moreover, after the G8 summit, SPD leaders were incensed that Merkel was taking too much credit for Germany’s foreign policy successes. So Merkel took care to consult more with the SPD. And in a very unusual step, she allowed her foreign minister, the SPD’s Frank-Walter Steinmeier, to join the opening dinner of EU heads of state and government. This was meant to signal that the SPD was an equal partner in the treaty negotiations. It seems to have worked. Merkel got plenty of compliments for her summit performance, not only from the CDU (and its sister party, the CSU), but also from the SPD.

Merkel delivered more than many people had expected, in fact. The official objective of the German presidency was to get a negotiating mandate for a new inter-governmental conference (IGC): it was not strictly necessary for Merkel to get agreements on the minutiae of the new treaty. But aware that the subsequent Portuguese presidency would not have the same diplomatic clout, Merkel aimed to settle as many outstanding issues as possible. The resulting deal was so comprehensive that it surprised even the optimists.

Poland

The country that came closest to wrecking Merkel’s summit was Poland. Lech and Jaroslav Kaczynski, respectively president and prime minister, had raised the stakes through their “square root or death” rhetoric. After Merkel refused to re-open the debate about the voting system, the Kaczynskis threatened to veto the entire package. Merkel, in turn, raised the spectre of convening the IGC without Poland. Merkel got most of Europe’s sympathies after Jaroslav Kaczynski said that Germany owed Poland the new voting system: if it had not been for the second world war, Poland’s population today would be 66 million, instead of 38 million. Perhaps someone should have reminded Poland that the EU was set up to overcome the divisions of the world wars, not to perpetuate them.

Merkel alone could not sway the Kaczynskis. It took the help of several others, notably France’s Nicolas Sarkozy, Britain’s Tony Blair, Spain’s José Luis Zapatero and Lithuania’s Valdas Adamkus. Finally, the Poles compromised: the EU will adopt the double majority voting system – not in 2009, when the new treaty is likely to come into force but in 2014 (followed by another three-year transition period). Poland also secured a clause on energy solidarity in the treaty, and a clause that insulated Polish law-making on morality, family and religion from the treaty's charter of rights.

Lech Kazcynski welcomed the EU’s “solidarity” in these matters, but many member-states will take the summit as yet another sign that Poland is Europe’s trouble-maker. Warsaw appears to have drawn the wrong lesson from its success at the recent EU-Russia summit. At the Samara meeting, Merkel and Commission president José Manuel Barroso expressed solidarity with Poland over the Russian ban on Polish meat imports. (Warsaw has been blocking the start of negotiations on a new EU-Russia treaty since late 2006 because of the ban). By siding with Poland Merkel and Barroso also raised hopes that the country would in turn show a more constructive stance on the new EU treaty. However, the opposite happened. The Polish government now seems to think that the use or threat of a veto is a good way of getting what you want in the EU. In the end, Poland could be the biggest loser from the summit. It has secured a bit more voting power until 2014. But this could be pretty useless if other EU countries are unwilling to forge coalitions with a government that is seen as uncompromising. Some of Poland’s traditional allies in Central Europe already turned against it at the summit.

France

President Sarkozy continued his hyper-active and unpredictable diplomacy that had also been on show during the G8 summit. Although Sarkozy, like Blair, helped Merkel to broker a deal with the Poles, he also criticised her for attempting to isolate Poland. It would be impossible, he said, that less than 20 years after the fall of the Berlin Wall, the EU should exclude the greatest of the East European countries. Surely the contrast to the dismissive tone that Jacques Chirac had adopted vis-à-vis the new members was no coincidence. Sarkozy also made it very clear that he would not put all his EU eggs into the Franco-German basket.

Sarkozy also surprised his European peers with a last-minute request to delete the commitment to “free and undistorted” competition from the EU treaty while “full employment” and “social progress” will remain as objectives. A fight-back by the British and the Commission followed, with the result that the competition objective will be included in a protocol attached to the new treaty, but business and competition lawyers are nevertheless worried.

There are two interpretations of Sarkozy’s move. He may need something visible and popular to help him stave off calls for a repeat referendum. After all, many French voters said they had disliked the constitution because they found it too liberal. Alternatively, this was his opening salvo in an attempt push for less liberal, more protectionist EU policies. After the summit he said that the elimination of the clause would allow for an EU competition policy that protects “national champions”.

Britain

Any further protectionist initiatives would put Sarkozy on collision course with Gordon Brown, who is soon to become prime minister. Blair and Brown had displayed a rare spirit of co-operation when they worked out the UK’s negotiating position and red lines ahead of the summit. It seems odd that they made a last minute demand to cut the powers and resources of the new foreign minister, given that Britain had been behind the initiative to create the foreign minister. The fact that Britain eventually dropped its demands (with the exception of the renaming, so that the foreign minister becomes the High Representative) suggests that these may have been tactical moves to get Britain what it really wanted: opt-outs from justice and home affairs and social security, and safeguards that the charter of fundamental rights will not impinge on British law. With his popularity now exceeding that of David Cameron, Brown should be able to avoid a referendum on the treaty. Meanwhile, the other European leaders will like the fact that Brown decided to work with Blair towards a summit success, rather than threatening to block the new treaty to appease the eurosceptics at home.

The EU

The Brussels summit has shown that the EU-27 can still reach difficult decisions. Long and arduous talks are nothing new for the EU. The 2000 Nice summit also took until the early morning hours and was, if anything, more vexing than last weekend’s meeting. Moreover, the EU cannot be neatly divided into old and new Europe. Hungary, Slovakia and – after some prevarications – also the Czech Republic had rebuffed Polish suggestions that the Visegrad four should stick together. The summit may also be taken as a sign that large countries still call the shots, perhaps more so than before enlargement. Germany, France, Britain, Poland and to a lesser extent Spain were the main players during the summit. The need to avoid a repeat referendum had strengthened the Dutch voice in the negotiations. Among the smaller countries, only two came into view: Lithuania (useful as a mediator with Poland) and Luxembourg (as the self-declared spokesman of those countries that had already ratified the constitution).

Katinka Barysch is chief economist at the Centre for European Reform.