Tough Times for the EU

The last few weeks have been filled with disturbing news for the European Union (EU) and its member states. The rejection of the proposed “Treaty Establishing a Constitution for Europe” by French voters in a referendum on May 29 was a clear signal sent to French politicians and administrators of the EU in Brussels. This referendum was not a typical vote on EU issues, where the majority of people stay at home. On the contrary, voter turnout was high at approximately 70 percent. 55 percent of the voters said “Non” to the constitutional treaty.  This devastating result made a similar outcome in the Netherlands on June 1 even more likely than polls had already indicated.  And the pollsters were not disappointed. 61.2% of Dutch voters said “Nee.” 

There was a glimmer of hope on July 10, however when about 60 % of voters in Luxembourg supported the treaty. But this was just a ray of light in an otherwise dark sky over the EU. At the EU Summit in mid-June, in what appeared to be a battle between the old and new European ideologies, leaders of the European Union member states were not able to agree on an EU budget for the period of 2007-2013. 

In this speech, the focus will first be on the “quo vadis” of the EU constitution treaty. Just one year ago, it was hailed as a document that would bring the countries of the European Union closer together, facilitate decision-making, streamline the political process by establishing a permanent, elected president, and for the first time, a foreign minister. When the document was signed in Rome in 2004, it appeared that the only country that had reservations adopting the constitution was the United Kingdom. At that time, some suggested that if the UK would not ratify the constitutional treaty, it should voluntarily, or with encouragement, relinquish its membership in the EU. Ironically, despite France having rejected the constitution, the prospect of it leaving the EU has not been introduced or supported. However, although France is enjoying a secured membership in the EU, as it was one of its six founding states, French influence has been drastically weakened.

What is “The Treaty Establishing a Constitution for Europe?”  There is no comparison to the US Constitution, consisting of only seven articles and 27 amendments added over the years. It is a document of about 328 pages, not easily read or understood and much too detailed for review by the individual citizen. While countries representing approximately half of the EU population have already adopted the constitution through referenda, or through their respective parliaments, the other half has yet to do the same. The current count in countries already having ratified the constitution by parliamentary vote includes Austria, Belgium, Germany, Greece, Hungary, Italy, Lithuania, Slovakia, and Slovenia. By vote and referendum: Spain.)

    The EU Commission envisions going ahead with this ratification process and may suggest having another referendum in those countries that did not adopt the constitution during the first go around. This would not be the first time that such measures are taken. The Maastricht Treaty (Treaty on European Union) had a second go around in Denmark in 1993 before it was approved.  Similarly, the adoption of the Nice Treaty, which the EU will have to revert to, if the constitution is not adopted by all member states, also had to be taken to the polls in Ireland twice before it was approved in October 2002.

Why did French and Dutch voters reject it? Aside from various domestic issues, the main reasons are as follows:

·        It was not made clear why the treaty is needed.

·        The benefits of the EU have not been explained sufficiently to its citizens.

·        The backlash of the democratic deficit in the EU. People have not been involved in most major decisions on EU issues.

·        National governments favor promoting their own domestic issues.

·        The EU economy is in dire straits. Two digit unemployment rates in France and Germany cloud peoples’ outlook of their future.

·        People are wary of the Treaty opening more doors for people to come to the EU from current or future member states and other neighbors.

·        The possible membership of Turkey raises fears among citizens of more jobs being outsourced and even more people coming to Western Europe.

However, any delay in ratifying the new constitution will slow down the further integration process of the EU. It may also have a delaying effect on the accession talks with Turkey expected to start on October 3. Furthermore, other prospective candidates for membership in the EU, for example, Croatia, may be forced to endure an even lengthier period of time before they will be considered as candidate countries to the EU.  Romania and Bulgaria, scheduled to join by 2007, may face a delay of a year or two. This cause for delay is due to a review of the decision making process, policies and a more inward looking EU. With France’s weight in the EU having been somewhat reduced, the other usual strong man of Europe, Germany, is facing political upheaval this summer in the form of early elections. With those two countries not assuming the lead role, who is?

The elections in Germany, which are tentatively scheduled for September of this year, will certainly keep German politicians preoccupied with national issues and less focused on discussions at the EU level. However, due to the importance of Germany to the EU, decisions at the EU level are likely to be delayed until after the elections. This is assuming, of course, that German constitutional issues do not impede the elections.

If the elections were to be suspended by the German Constitutional Court, the current government, headed by Chancellor Schröder, would be left as a lame duck administration and would halt European decision-making. However, if the elections proceed as planned, discussions in regards to the future of European expansion will undoubtedly be increasingly difficult.

At the Summit in Brussels in mid-June, the European heads of state decided to extend the period of ratifying the Treaty by another year until the end of November of 2007. It remains to be seen whether officials will be able to rise to the challenge of how to proceed with the ratification process. Perhaps it would be beneficial to analyze and determine the difficulties faced within recent years including why the benefits of the European Union were not communicated to the citizens and why the citizens are opposed to various aspects of the EU. Undoubtedly, the EU Commission has been presented with a major task ahead in promoting the EU.  National interests of politicians who are concerned more with promoting their own achievements, rather than emphasizing and working towards collective EU advancements and achievements present themselves as a hindrance to this effort.

This hindrance can be seen recently in the failed discussion and resolve on the EU budget for 2007-2013. Negotiations and discussions in Brussels became rather personal as the budget issue at the EU Summit was centered on the question of Britain surrendering a budget rebate of $5.6 billion annually. To put this into perspective, the total EU budget for 2006 is $139 billion. The British Prime Minister Tony Blair views the budget rebate as a negotiating tool to reform the Common Agricultural Policy (CAP) of the EU and its agricultural subsidies that make up approximately 40 % of the EU budget, of which France is the largest beneficiary.

The Summit also showed that there currently seems to be a lack of leadership in the EU. France and Germany do not have the influence that they have had in previous years. Moreover, there appears to be no one individual who is a true European leader. One might argue that Tony Blair has the potential to emerge as such a leader, however the Summit in Brussels was a clear indication of the line drawn between Blair and his counterparts, President Chirac and Chancellor Schröder. In addition, the position of Chirac and Schröder was also supported by Sweden and the Netherlands.

In the eyes of the people, Chirac and Schröder are on the losing end in the EU at the moment. Their time is up, as Schröder faces the election in September, which he is likely to lose and Chirac faces a re-election in the spring of 2007. President Chirac is unable to relinquish any farm subsidies because the 660,000 farmers in France and their dependants form a large block of supporting voters. Both at historically low levels; Chirac and Schröder have lost public support.  Schröder’s vote body is currently below 30 % with Chirac’s public approval rating close behind at 27 %.

As Britain takes over the EU presidency, Prime Minister Blair must use all his diplomatic skills to ensure that his presidency is able to deliver results at the end of this year. He has already pledged that he would surrender the British rebate if agricultural subsidies were radically cut. Blair supports these funds being used for R&D, technology, science and education, but not agriculture. Chancellor Schröder and other politicians within the EU recognize Blair’s reform agenda and plan to democratically reduce CAP as an attack on the current system and orders in the EU. These politicians support the preservation of the old European system of social benefits and controlled economic activity. Accusations of Prime Minister Blair wanting to introduce an Anglo-Saxon capitalist system, which would turn the EU into a free trade area, have also been made.  This would be very different from their perception of the current EU treaties and the proposed treaty on the constitution.

Consequently, it may be argued that the EU has reached a crossroads. It must be decided whether the EU will remain a trade block with integrated economies and a single currency, or whether political determination will succeed, as well as the will among citizens to further integrate and establish a European entity that does not sacrifice national, regional and local identities, but rather embraces them under the umbrella of a united Europe.

This summer will prove to be not only challenging and exciting, but also the start of a new chapter in the history of the EU and its member states. For Americans, the discussions will not appear relevant initially, however, on a long-term basis, variables such as whether the EU is focused towards greater integration and more common policies, or a more fragmented environment held together by trade benefits for its members, will affect not only the U.S., but also the world. 

The EU is not going to break up and the Euro is not going to be abandoned, however, it cannot be ignored that recent events have imposed a significant blow to its efforts and in turn, have further emphasized the political savvy and perseverance that is required to ensure its progress.  Taking Europe into the future requires strong leadership and the will to engage the people in the European idea that was borne more than 50 years ago

Sven C. Oehme

President & CEO

The European-American Business Organization, Inc.

The American Business Forum on Europe, Inc.