Archive for March, 2010

It was an odd old meeting of EU leaders on Thursday in Brussels. There had to be some sort of deal on Greece. But it was always going to be entirely down to German chancellor Angela Merkel.

And so it was. With the exception of a concession to France saying that the bulk of IMF money involved in any Greek rescue should be European, the text was Berlin in style and content. Everyone else in the eurozone then signed up to it.

The declaration goes much further than the 11 February statement but it remains a through-gritted-teeth statement promising action only “ultima ratio.”

The detail of the statement – help as a last resort, the IMF and bilateral loans from eurozone member – serves two masters in Germany: hostile public opinion and, more importantly, a 1993 ruling by its constitutional court stipulating that monetary union must strictly follow the rules of the Maastricht Treaty (including its no bail-out clause).

If Greece really cannot pay off its debts, then on the basis that monetary union would be destabilised, Germany would be able to act in keeping with the court judgement. This is apparently the rationale behind Merkel’s hard line. So it would be an act of preservation of the eurozone rather than any act of solidarity.

(All the while, hawkish German professors are waiting for a chance to bring this to court once more.)

Treaty change
Ideally Germany would like a treaty change to tighten up eurozone rules and prevent a Greece-like situation ever happening again. Merkel said as much before the Bundestag on Thursday morning.

It would like economic governance Berlin-style – a check on spending, greater external control over potentially profligate countries. And sanctions for those who misbehave.

The last paragraph of Thursday’s statement calls for the establishment of a taskforce exploring all options (ie Treaty change) to this end. Other member states are not enthused (Irish officials blench at the idea) and it is unlikely to become a reality. But still it shows the depth of German feeling on this matter.

And what of the European Commission? It appeared to be wrong-footed by this call for a taskforce looking into economic governance. President Jose Manuel Barroso hotly defended the commission’s right of initiative when asked about it by press on Thursday evening.

It was interesting to see the evolving nature of paragraph on the task force over the course of the summit. The final statement says: “We ask the President of the European Council to establish, in cooperation with the Commission, a task force with representatives of member states, the rotating presidency and the ECB …”

An earlier version stated: “We ask the President of the European Council to establish a taskforce with representatives of Member States, the Commission and the ECB ….”  And even then, the commission had only been added as an after-thought, I am told.

Finnish foreign minister Alexander Stubb has drawn up quite a useful metaphor for Catherine Ashton in her job as EU foreign policy chief. She is akin to a football club manager. She has to deal with 27 foreign policy egos or players – “27 Ronaldos” and she has two very demanding managers – the European commission and council – and a set of picky and demanding “fans”  in the European Parliament.

Nevertheless, Stubb appears to have done the club manager rather a big favour by getting six Ronaldos together with her over the weekend for informal discussions on Europe’s foreign policy strategy. Alongside Ashton and Stubb, ministers from France, Sweden, Spain, Italy and Estonia were present. Turkey was invited to give a “rough assessment” of EU foreign policy. The German, Danish and Norwegian ministers were also invited but could not make it.

The whole exercise had an aura of real informality – the dress code was very casual, shoes were removed during discussions, chocolates were hand for sustenance and there were no note-takers or advisors. Ashton – presumably at the behest of sporty Stubb – even sledged to her first meeting with the press. A potentially perilous moment for the (symbolic) reputation of EU foreign policy. Spain’s Miguel Moratinos chided Stubb for sending him a text message that should have but did not rhyme, Italy’s Franco Frattini got a bottle of Finnish vodka as a birthday present, while Sweden’s Carl Bildt could be heard discussing the “incredible stupidity” of reindeer. Incidentally, the four-legged and somewhat recalcitrant object of Bildt’s scorn was then persuaded to stand in front of the small gathering of foreign ministers for a photo shoot.

While EU foreign policy will not change into a cohesive and straightforward matter on the back of the meeting, it did serve two purposes. It allowed Ashton to better get to know the ministers whose message she is supposed to represent.  Many of them have known each other for years, or have an automatic standing in the club by virtue of having been appointed foreign minister of their country. Ashton had neither foreign policy experience nor knew the foreign ministers when she started in December. And while personal relations are not everything, it is hard to get stuff done if the message-makers and the messenger consider themselves strangers.  “Above all, this is a support meeting for Cathy Ashton,” said Stubb, who predicted a “reverse Obama” effect for her. This is rather a big claim and rests largely on whether she manages to establish a credible EU diplomatic service.

The other spin-off of the meeting was to give the ministers present a chance to raise the question of what their role is post-Lisbon, where Ashton is supposed to be the single face of EU foreign policy and where they no longer attend European Council meetings. Clearly, some expect a ‘special envoy’ role. This could be something like sending Moratinos to the Middle East when Ashton is double-booked. I see the merit in the idea. But I also see the pitfalls. What if the special envoy is so thorough in his brief that he is the de facto chief in this area, eclipsing Ashton who is both self-effacing and still learning the new dossiers?

In any case, the meeting gave food for thought, not least because it allowed for thorough and free-flowing discussion on the issues – something that does not happen in the formal ministerials. They are planning to repeat the exercise in a year’s time.

Perhaps Ahmet Davutoglu’s assessment of EU foreign policy will give them enough to chew over until then. His was a trenchant message to the effect that the EU is not visible on the ground where it should be – ie in Iran and the South Caucasus. This leaves gaps for others (read Russia) to fill. The second message is one Turkey has been working up to for some time. It is this: the EU needs Turkey as much, if not more, than Turkey needs it.

“It seems (..) an interesting contribution.” European Commission President Jose Manuel Barroso didn’t exactly shrug when asked about Germany’s suggestion to set up a European Monetary Fund. But the words rather did. The proposal was put forward by the minister for finance of Germany and lacked “any details,” he noted.

In all, a supremely understated response. And clearly not of the order liberal leader Guy Verhofstadt was looking for. But there was more. Lest, it would seem, the casual observer may be led to think that the commission was no longer in control of the loud discussion started by “the minister for finance of Germany.”

There will be a draft directive on derivatives before the summer; a market abuse directive before the end of the year; and a communication on reinforced economic policy coordination and country surveillance (time unspecified). Meanwhile, the commission is “ready to propose” an EMF, only it’s calling it a ‘European framework for coordinated assistance.’

And yes, it “might probably require” a treaty change.

Two things to take from the parts of the debate on Greece. The disaster was all of its own making. And a little bit the fault of other member states too. The commission had in the past called for more “audit powers” several times. “Unfortunately this was rejected by member states,” said Barroso, as if he was talking about the vagaries of the weather. Unfortunately it was raining that day. Now governments appear to have seen the error of their ways. Even Germany is on board.

“I don’t have any position in favour or against GMOs,” said Barroso in response to a question about why he was “pushing” GMOs onto an unwilling public. The college makes decisions only on the basis of the opinion its scientific advisory board. A cluster of Greens holding placards saying “For a GMO-free Europe,” hissed and booed as appropriate.

There were about 30 of them. They roughly tripled participation in Question Hour. Alas, they proved to be a one-issue lot and were soon gone.

EPP leader Joseph Daul made a series of tough-sounding statements on the diplomatic service. His delivery, note-read, meant it was like being blasted by cotton wool. Perhaps it is because both questioner and the questioned are of the same political colour.

“Hats-off to you,” said a Dutch MEP sarcastically noting that Barroso managed to spend 2000 euros a day while going about his presidential duties. “Why can’t you just publish these details?” he exclaimed.

Barroso, who rather thrives on these exchanges, drew himself up. “I do not accept this easy criticism, populistic and demagogic.”

And this led to what can only be described as a landmark moment in Barroso’s question time to date. Socialist leader Martin (Shouty) Schulz, normally loudly, resolutely and reliably anti-Barroso cheered and thumped his desk in agreement. One can only wonder at this strange turn of events.

It’s interesting to see how the tables have turned. Until now it was the eurozone putting all the pressure on Greece. Eurozone bigwigs wagged their fingers at the spendthrift state, shocked by its massive budget deficit and fiddling of the statistics. European Commission and ECB officials as well as German Chancellor Angela Merkel (upon whom the other side of this saga rests) demanded austerity measures. And then more of them.

“Greece must understand that taxpayers in Germany, Belgium and the Netherlands are not prepared to correct Greek fiscal policy mistakes,” said eurozone chief Jean-Claude Juncker at one point.

The game of promised, but not yet given, support appears to have paid off. The Greek austerity plan unveiled on Wednesday went further than had been expected (although some Greek papers note that more structural reforms are needed for longterm growth). European Commission president Jose Manuel Barroso said the Athens programme to correct its fiscal imbalances “is now on track.” Juncker said much the same thing.

But having been forced into three budgets in as many months, prime minister George Panandreou, (a socialist who came to power last October on the back of promises of wages increases and high social spending) has shifted the weight of expectation back onto the eurozone, and specifically Berlin.

He has said he will go to the IMF if he doesn’t get the financial support he is looking for. “We have shown we can take difficult decisions. We are waiting for European support – the other side of the agreement.”

The IMF route is widely seen as the least desirable option, a reinforcement of the impression that the 16-member eurozone cannot deal with its own problems.

Papandreou is obviously expecting an answer soon. He will visit Berlin on Friday, Paris on Sunday and Washington early next week.

While the Greek prime minister faces popular unrest for the harsh measures he has taken without much support from his eurozone partners, Merkel faces a domestic backlash for any aid given to Greece.

Several politicians in her own party have focused on the pension ages in the different countries, incensed that German taxpayers will fund an earlier retirement age for Greeks. Others have demanded that Greece sell off a range of assets, such as uninhabited islands, to cut its debt. A poll in the mass-selling tabloid Bild on Monday showed that 4 out 5 were against a rescue for Greece.

So far Merkel has remained tight-lipped. She has let it be known that the meeting won’t be about “aid commitments.” However, several newspapers have reported that discussions within the German cabinet on how financial assistance would look have intensified.

The Wall Street Journal on Thursday quoted some hardnosed officials. “We can only justify a bailout if it’s about protecting Germany, not Greece,” said an aide to Merkel. Another senior official is quoted as saying: “We aren’t interested in bailing out Greece’s interest-rate spreads—only in preventing Greek insolvency.”

But the answer has to come soon. Greece has to service debts to the tune of around 23 billion in April and May. Whether it will manage is the immediate question.

The longer term question is whether the eurozone can survive without a political and economic union behind it, without some sort of tax raising power and ability to make transfers to poorer eurozone members. And, of course, whether citizens, let alone governments want to make this huge political step.

Herman Van Rompuy has one major advantage over his fellow new EU appointee Catherine Ashton. His job as President of the European Council is entirely new. There were few expectations, except that he should not be so bold as to try and steal the limelight from national leaders. And he had no predecessors. (Ashton, as EU foreign policy chief, has to contend with Javier Solana’s ‘tireless diplomat’ ghost.)

And despite being nominated by EU leaders in November, Van Rompuy did not officially take up the post until 1 January. He had his first major appearance at an informal summit that he convened almost six weeks later.

This has allowed the former Belgian PM to stroll into the job at his own pace. Quietly meeting leaders and assessing his first moves. His manner remains unassuming. First the weather and then a faulty microphone got the better of him during his two public appearances at the 11 February summit. And his speech delivery, despite flashes of  humour, is dry to say the least.

But it would be a mistake to dismiss him as a grey nobody, inclined only to do what member states want. Van Rompuy is also busy trying to make them do what he wants.

He himself counts among his achievements the fact that the political declaration in support of Greece after the summit was made in the EU’s name, and presented by him. Although naturally, Germany, and to a lesser extent France, were running the show behind the scenes.

And after the meeting he made sure to send around a letter to EU leaders outlining what he thought had been agreed at the summit. The letter contained eight points, largely to do with the EU’s future economic strategy. An impressive tally for a informal meeting that was both brief and largely dominated by the Greek crisis.

One of the points contained in the letter concerns Van Rompuy’s presence at the G20. Prior to the Lisbon Treaty coming into force, the EU council president’s attendance at G20 events was open to question. According to the treaty, the president represents the EU in CFSP issues only. The commission president, who attends G20 meetings, does everything else. But Van Rompuy promptly removed that question mark. He will be in Toronto too in June as he made clear in the letter and in a recent speech to European Parliament – a move that has apparently upset the British and unsettled the commission.

This is all part of a wider policy path laid out in a thoughtful speech Van Rompuy gave at the College of Europe in Bruges last week in which he said that more economic governance is the key to making the EU stronger internally and therefore globally. In addition, he suggests that pursing global economic governance through forums such as  the G20, noting that foreign economic policy is  likelier to give rise to a unified EU voice.

To  this end, he is hatching plans to have EU leaders meet more often – up to ten times a year. While member states are not cheering wildly at the prospect, there does appear to be a general willingness to gather more often (though perhaps not ten times) so long as the meetings are useful.

“I consider it the most daunting political task of the office of permanent President to help the Union
find its compass,” he said in Bruges.

Make no mistake about it, he has started trying.