The State of the European Union

The European Union Studies Center, New York

- 21 September 2005 -

Professor Kaufmann, Dear Colleagues and Friends, Dear Guests,

I am honored to be at the European Union Studies Center of CUNY to deliver the traditional “State of the European Union” address. This has become a tradition at the end of each Presidency. But before commencing, I want to thank you personally, Professor Kauffman, for the tremendous efforts you devote to explaining and promoting the European Union in New York. These efforts are certainly very much appreciated.
 

I would also like to remind you that I might not be best positioned to analyze the latest developments within the EU in their entire complexity. Don’t forget, I am based in New York, far away from the fray. I will nevertheless try to do my best. When you hear me expressing opinions, you should understand that my opinion is only my own.
 

My presentation will be in three parts. Part one and part two, the longest, will review what happened during the first half of his year: recalling the main achievements of the Luxembourg Presidency and analyzing the setbacks during it. There has not been a great deal of progress since, so today is still a good moment to review developments. In part three, I will try to explain why, despite some setbacks, the EU is still alive and kicking.
 

Before starting, let me point out a few specifics about Luxembourg Presidencies:

-         It has always been a huge task for a small country like mine: in NY alone we chaired 588 EU coordination meetings. It means extremely stretched resources and long days for everybody.

-         It was Luxembourg’s 11^th Presidency since the founding of the EU: so we have got some experience when it comes to Presidencies.

-         Presidencies never take place in isolation, but in close coordination with the outgoing presidency, the incoming presidencies, as well as the European Commission and the European Parliament. The latter is particularly true in Luxembourg’s case. The agenda for our 6 months was largely preset, following the adoption of a multi-annual work program.

-         Most countries, recognizing our qualities as an honest broker in most areas, expect a lot from Luxembourg presidencies. This adds to the pressure.

-         The system of rotating presidencies is nevertheless important to us: it shows that size is not the only thing that matters when it comes to advancing the European integration process. It also helps to increase the interest of your own citizens in the process and brings Europe closer to them.

-         Finally, it was supposed to be one of the last presidencies under the present Treaty: the UK, Austria and Finland will complete the cycle in 2006. After that, there will be a change in the system.

A. Main achievements of the Luxembourg Presidency
 

First, the Stability and Growth Pact has been reformed.
 

This brings to an end a long period of uncertainty threatening to give rise to a serious dispute between Member States in the Euro zone.
 

Stability and budgetary discipline remain key aspects of the reformed pact. We have not introduced excessive flexibility, but we have given the Pact more of an economically sensitive reading rather than an automatic one. The two reference values of 3% for the public deficit and 60% for the public debt have been upheld. However, the renewed Pact relieves some of the deficit pressure of the member states with a more flexible application of the rules, especially during an economic downturn.

Stability and growth, the pact’s two key dimensions have been put on an equal footing.

Second, new life has been brought into the Lisbon strategy
 

Together, we have managed to revive the Lisbon Strategy, the strategy meant to transform the EU into the most competitive and knowledge based economy by 2010. Increased modernization of our economies, a renewed willingness to innovate, to progress in the field of research and to foster job creation are the main areas of the new strategy, which is to be fully inclusive, both in terms of social cohesion and in terms of appropriate environmental policy. 

In addition to the substance of the Lisbon Strategy, its method of application has been changed: the Member States will become answerable to their national parliaments. National legislators will indeed have to agree to the national reform programs prior to their submission to the European Commission.

Third, the Luxembourg Presidency has succeeded in setting new objectives have been set in public development aid

Unfortunately the press largely ignored this. Somehow, I have a feeling that journalists don’t like good news coming out of Brussels.

The objective of dedicating 0.70% of national wealth to cooperation efforts by 2015 has been reaffirmed, but an intermediary objective for the European Union of 0.56% of national wealth by 2010 has also been set. This decision will increase the level of development aid, from 46 billion euro in 2006 to 66 billion euro in 2010, and from 2010 onwards, 20 billion euro more per year will be added.  Hopefully, this decision will inspire other parts of the world as rich as the European Union to take similar steps to help eradicate poverty throughout the world.

Fourth, there has been progress in the area of external relations.

I can of course not cover the whole scope of external relations with third countries.                

Relations with our American partner have for instance been substantially improved during the Luxembourg Presidency. The improvement began in February with the visit of President Bush to Brussels. I’d like to quote President Barroso of the European Commission here: “The visit of President Bush is really a very, very important one. Europe and America have reconnected. This visit has highlighted all that unites Europe and America”. [unquote] The rejuvenated dialogue was pursued during the regular summit meeting in Washington in June.

Additionally and most importantly, an international conference on Iraq took place in Brussels in June 2005, jointly organized by the European Union and the United States, in cooperation with the United Nations. The Luxembourg Presidency had suggested it to President Bush during the February meeting.  The EU and the US organizing a conference, on a topic as contentious as Iraq, and working hand-in-hand to foster democracy and economic development, was certainly a major advance in transatlantic relations.

Similarly, the EU was able to strike an agreement with its Russian neighbor on what is called the “four spaces" at the Moscow summit in May 2005. Even if a long road remains ahead of us, our relations with Russia have improved considerably. My personal opinion is that we should all devote more time to our respective relationships with Russia.

Besides, a lot of work was devoted to bringing other countries closer to the Union and ultimately to the values we share. The accession treaties with Bulgaria and Romania have been signed in Luxembourg on the 25^th of April 2005. Provided they continue to implement their respective reform agendas, they are scheduled to join our Union in 2007. 

B. Setbacks during the Luxembourg Presidency

The Financial perspective

I was hesitating for a long time whether I should go into this today in detail. Finally I decided to do so, because so much has been written about it, correctly and wrongly. It’s not easy to do so in a nutshell, but let me try at least to recall the main elements of the discussion.

In December 2004, the future Luxembourg Presidency was asked to achieve political agreement on the financial perspectives, in fact the budget of the EU from 2007 to 2013, before the end of June 2005. We had a clear mandate!

Already in January 2005, at the European Parliament, the Luxembourg Prime Minister struck a note of caution:  [quote] “We will do everything to find agreement, but I have no illusions. The Member States have taken up positions that are so strict and entrenched that they will find it hard to abandon them in time. The absence of an agreement in June will not be a failure on the part of the Presidency.” [unquote].

This actually became a failing on the part of Europe and it led us into a crisis after the uncertainties raised by the French and Dutch referenda. The negative results certainly did not have a positive influence on the budget negotiations.

On the other hand, we must not forget that 20 countries out of 25 ultimately backed the compromise proposition of the Presidency.

Let me briefly recall the situation.

-         Budget limits: whereas some Member States wanted to limit the European budget to 1% of national wealth, the slightly higher Presidency’s compromise proposition was finally accepted by everybody.

-         The British rebate: In its last proposal for a final compromise, the Luxembourg Presidency upheld the principle of the British rebate without freezing it: the rebate would remain in place as before regarding the 15 original Member States, but the UK would normally co-finance the cohesion policy in the new Member States, although without contributing to the Common Agricultural Policy for these States. The proposition would have led to an annual rebate of 5.5 billion euro.

-         Initially, the Presidency had proposed freezing the British rebate to 4.7 billion euro, which would have enabled us to revise the net contribution of the Netherlands, Germany and Sweden in particular.

-         So, if the Presidency’s initial proposition with regard to the British rebate had been retained, the problem of the Netherlands, Germany and Sweden could have been solved. The Presidency’s final proposal would not have allowed us to do all of this but at least it would have meant that the UK would co-finance cohesion policies in the new Member States, except for the Common Agricultural Policy.

To say that nothing would have been done to reduce the cost of the Common Agricultural Policy is not accurate: in a Europe of 15, the Presidency proposal would have taken us from 42 billion euro in direct aid and market measures in 2006 to 35 billion euro in 2013, all in all some 37% of the European budget, down from 68% in 1986.

The fact is: despite all our efforts the financial perspectives could not be finalized. But there is some time left. That might be another reason why some countries upheld tough negotiating positions. The negative dynamics stemming from the lost referenda did the rest. It ultimately blocked the machinery.

The Ratification of the Constitutional Treaty

I have no intention of retracing the complete history of this ill-fated Treaty, which - by the way - is an international treaty, like many others in the EU before. Perhaps it was not the best idea to call it a “Constitutional Treaty” or even worse a “Constitution.” It actually does not have a lot in common with national constitutions as we know them.

Furthermore, I’d like to point out that, if the failed referenda in France and The Netherlands took place during the Luxembourg Presidency, it was a simply a matter of calendar. We had of course no saying in them.

I would also like to recall that the main objective of the Constitutional Treaty was to strengthen Europe and its institutions by:

-         establishing the European Union as a single legal entity;

-         simplifying the decision making process (qualified majority);

-         clarifying competences between the Union and the Member States;

-         enhancing the visibility of the EU in the world (Foreign Minister);

-         making the EU more democratic (double legitimacy of States and citizens);

-         putting a strong emphasis on citizens rights (Charter of Fundamental Rights);

-         and finally, by strengthening economic and social cohesion among the Member States.

So I ask you: what’s wrong with all that?

Furthermore, I would like to point out that the groundwork for the Treaty was laid during the so called “Convention on the Future of the European Union,” a broadly based forum, discussing for more than two years, and comprising members of the European Governments, national legislators (even opposition politicians), members of the European Parliament and representatives of the civil society. Actually, some of those who later criticized the Treaty have actually been taking part in drafting it.

Whatever, today we know. The Treaty has been rejected by the people of France and The Netherlands. We will have to live with it and most importantly: we should not dramatize the situation.

Why did they reject it? That’s a long story! I am a little bit hesitant to embark on analyzing the reasons of this rejection. Indeed, I believe the reasons are multiple and complex. They differ from country to country, even from voter to voter.

I will only try to list a few:

-         Referenda are always difficult: people usually do not answer the question, Very often they express a general opinion on the government;

-         Europe is only slowly emerging from an economic downturn: people have lost jobs or were afraid of losing jobs. They blame it on Europe. Why do they? Because for years politicians have been blaming “Brussels” for all of the bad things. If something goes wrong, it’s “Brussels.” If something goes right, it’s national merit and politicians commend themselves. The reality however is not like this.

-         People are afraid of enlargement; of Turkey etc. Understandable! Maybe it was too quick. But what would have been the alternative? Building a wall around old Europe? Ignoring the aspirations to freedom and democracy of our neighbors emerging from Communism? I am convinced that the integration of the new members into the Union will ultimately benefit everyone. But people don’t seem to recognize these long-term benefits of solidarity, cohesion and ultimately peace and prosperity. Maybe our parent’s and grand-parents generations had a better understanding what this means: they witnessed a Europe torn apart by war and destruction.

I am sure there were a lot of additional reasons, good and bad, to reject the Treaty.

But let’s leave it at this for now. Because we should not forget that 11 Member States have already ratified the Treaty, be it through parliamentary procedures or referenda.

On July 10^th, following weeks of intensive debate, my countrymen, for instance, approved the Treaty by a solid majority. There was a debate – such as we never had in Luxembourg – but at the end of the day, a majority of Luxembourg’s citizens approved the Treaty. Why? Because they recognize what Europe gave us and they know that only a united Europe will have the solutions for the future! I guess countries like Greece, Spain, Portugal or Ireland know very well what Europe gave them. In the same way the new members start to recognize the new opportunities that Europe brings along.

But we still have a problem. The Treaty has been rejected by some and we of course must fully respect their opinion.

Where do we go from here? I don’t really know. The fact that Luxembourg said “Yes” will probably not be enough to save the Treaty. Don’t forget that some are perfectly fine with having the Treaty laid on ice. They will certainly not push to revive it.

Luxembourg was a strong advocate of continuing the ratification process. Because we sincerely believe that the Constitutional Treaty is the answer to many of the questions the European citizens raised, whether in France or Luxembourg, The Netherlands or elsewhere.

Following the decision to continue the process, some Member States felt that a period of reflection, explanation and discussion was needed. The European Council, meeting on June 16^th and 17^th 2005, heard their appeal and considered that the date initially planned for a report on ratification of the Treaty, November 1 2006, was no longer tenable. Since then, these Member States have decided to postpone the ratification procedure in their respective countries.

Let’s hope that all this will indeed lead to a period of objective debate about Europe in all the Member States, whether or not they have ratified the Constitution, a debate about its goals, its limits and, last but not least, its achievements in terms of peace and prosperity on the European Continent.

But the Treaty is not completely buried altogether. The fact is that we need to reform Europe’s institutions to ensure their efficiency in an enlarged Union. The Treaty offered some interesting solutions, perhaps not for everything. The state of affairs will be examined by the European Council under the Austrian Presidency in December 2006.

C. Europe is alive

The fact that financial perspective for 2007/2013 could not be adopted – but we are not yet in 2007 - and the rejection of the Treaty by two founding members of our Union is without doubt a setback.

But the European Union is still there. It will not disappear; neither will the euro. Be sure of that! We will have to navigate through rough waters, but we will do it; in Europe and for Europe!

Work continues every day in Brussels. Diplomats and officials from 25 countries meet daily in Brussels and elsewhere to discuss questions of common interest: from food security to terrorism, from air transport safety to money-laundering, from cross-border crime to common accounting standards, from development aid to a clean environment. Of course this often ignored by our citizens. It’s not appealing to journalists either. They prefer big events and big news; with a slight preference for the negative, when it comes to the EU.

Let’s also not forget the unique power of attraction the EU has vis-à-vis other non-member countries, be it on the Balkans, around the Mediterranean or in Central Asia.

Believe me; Europe is alive, well alive, and continues to act as a magnet for many countries, be it in terms of values or in terms of markets.

I’d like to offer you a couple of examples:

Internal market: The single market is the core of today’s Union and it is functioning. The four freedoms of movement – for goods, services, people and capital – are a fact. We worked hard to make it happen. We adopted hundreds of laws to sweep away the technical, regulatory, legal, bureaucratic, cultural and protectionist barriers that have stifled free trade and free movement within the Union for decades. But again the victory passed largely unnoticed by the public. Shortcomings remain, in particular in the services sector. But despite the fact that the new Treaty has been rejected, common policies are a fact: agricultural, trade, fisheries, energy, environmental etc. In all these fields, we pursue the work on a daily basis.

European Security and Defense Policy: a great deal is being said about the inability of the EU to develop a common policy in this field. But the contrary is actually true: we progress, step by step, but we progress.

-         In the field of civilian crisis management for example, five ground operations are currently being implemented by the EU: police training missions in Bosnia and Herzegovina, the Former Yugoslav Republic of Macedonia and the Democratic Republic of the Congo, a rule of law mission in Georgia and a security sector reform mission in the Democratic Republic of the Congo.

-         A crucial stage has been reached with the launching of the EU-led mission ALTHEA in Bosnia and Herzegovina. The EU has taken over from NATO its most ambitious military mission to date with 7,000 troops deployed under EU command to ensure stability and security in the country.

Development aid and humanitarian assistance: the EU is the biggest aid donor in the world, accounting for 55% of development assistance, 66% of grant assistance and some 55% of humanitarian assistance globally. The EU and its Member States are collectively implementing projects nearly everywhere in the world.

The United Nations: the European Union is a reality within the United Nations. I have already mentioned the 588 coordination meetings between the 25 EU partners to achieve common positions and to prepare the recent summit. We do not succeed every time, of course. During the Presidency I was in charge of the Security Council. I know whereof I speak. The Luxembourg Presidency took the floor no less than 16 times on behalf of the EU within the Security Council chamber. We spoke with one voice on a number of subjects, ranging from terrorism to small arms and from East Timor to Haiti. Overall, the EU is respected and trusted partner at the UN, whether at the Secretariat level or among the UN member states.

Iraq: the EU has been criticized for not becoming sufficiently involved. Again facts and figures show a different picture. I already mentioned the June 22^nd conference in Brussels, attended by more than 80 countries and designed to coordinate global reconstruction efforts. Since the end of hostilities, the EU has been involved in almost all aspects of the effort to bring stability, democracy and prosperity to Iraq. Since the end of hostilities, the EU has collectively deployed €320 million with a view to restoring key public services, boosting employment and reducing poverty. The European Commission alone has adopted an Assistance Program for Iraq worth more than €200 million for 2005 alone. An integrated training mission for Iraq has been launched this summer: more than 770 judges, senior police and correction officers will be trained with a view to strengthening the criminal justice system and the rule of law.

Sudan:  the EU has been at the forefront of international assistance backing up efforts led by the African Union to address the crisis in Darfur raging since 2003. The EU has mobilized a total of 570 million euro in response to the Darfur crisis. The EU has been the prime mover behind United Nations Security Council Resolution 1593 referring the situation in Darfur to the International Criminal Court, to ensure that those who have perpetrated war crimes and crimes against humanity will be held accountable.

Counter-terrorism: The European Union moved quickly in the aftermath of the July terrorist attacks in London to strengthen counter-terrorism cooperation among its 25 Member States, despite the shock from the lost referenda. At a July 13^th meeting in Brussels, EU ministers decide to speed up the implementation of the EU action plan to combat terrorism. It includes measures to strengthen cross-border investigations of terrorism, to intensify information exchange, to address the issue of terrorist recruitment. The EU ministers moved to adopt stricter controls designed to keep bomb-making materials out of the hands of terrorists. In addition, new funding was approved for research to prevent attacks on public transportation systems like, subways and trains. With the EU members acting as one in the field of counter-terrorism, the United States are not required to establish cooperation policies and practices with 25 separate European countries. And we become a far more effective partner for the United States in our shared efforts to eradicate terrorism.

Conclusion

By not having the Constitutional Treaty in force as planned by fall 2006, the European Union certainly missed a chance to become more transparent, more democratic and more efficient. But the European Union has not disappeared.

I hope the examples I gave have convinced you.

There are numerous examples in recent history, where the EU emerged stronger from a so-called crisis situation.

It is most important to draw the right conclusions from the setback and to continue to work relentlessly towards a prosperous and secure Europe, an entity comprising more people than the United States and Russia combined.

We need to better involve the European citizens, to better inform them and to listen to their concerns and needs. Maybe the European integration process ignored the European citizens for too long. Maybe also the European citizens were not really interested in it. One thing is certain, when it comes to Europe; we must to reconnect the citizens with their political leaders. I believe our political leaders got the message.

I also believe some of our politicians should become more responsible when it comes to Europe and stop blaming the European Union for everything that goes wrong.

I finally believe that the reporting about the EU has to become more balanced. Bad news, mistakes and disagreements should of course be mentioned. Good news, achievements and agreements should as well. The press has a huge responsibility here: it is the prime source of information for our citizens about Europe. In addition, the EU itself has to improve its “public diplomacy”.

Are the recent setbacks a materialization of the two confrontational conceptions of Europe, as some have suggested, including my own Prime Minister? A conception that relies solely on the virtues of the market, incapable of producing solidarity, and a conception that relies on a more extensive political integration: the free trade zone against the political union. I have some sympathies for such a theory, but I can’t tell you for sure.

We certainly need a discussion between those who believe Europe has already taken a step too far and those who believe that it must go further. Discussions should not only be between governments. The public, civil society and, most important, the younger generations should take part.

I am confident, that at the end of the day, we can reconcile both conceptions; and our children will be continuing to work together towards maintaining the European Union as a beacon of peace, democracy, development and solidarity.

A strong, efficient and prosperous European Union is in the interest of the United States. I sincerely do not believe that are two other entities in the world as close to each other as the United States and the European Union.

Of course we have had differences, especially over the last years, and we will have differences. But if your share the same values of freedom, democracy and the rule of law, you find solutions to problems.

We might discuss hard about from Foreign Sales Corporations and Airbus, about GMO and steel, about this or that but in the depths of our souls, we know that, when it gets serious, we can trust each other, like no one else in the world. The US-EU relationship remains the most powerful, the most comprehensive and the most strategic in the world.

I thank you for your attention.