Wed, Jun 15, 2005 page9

• From constitutional crisis to a crisis for the European project

  Solutions for EU integration are needed after the French and Dutch rejected the constitution, but Chirac's maneuvering might overshadow the real work

  • By Ian Davidson
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  Since the shock of the French and Dutch "no" votes against the EU's proposed constitutional treaty, events have followed their inevitable course, but more rapidly than expected.

  The French "no" was a massive blow to the political credibility of French President Jacques Chirac. So he did what French presidents usually do in such circumstances: rather than admit that French voters might be right, he sacked Prime Minister Jean-Pierre Raffarin as a scapegoat, replacing him with his prot?g? Dominique de Villepin, who has never held an elective office.

  Opinions differ as to the reasons for France's rejection of the constitutional treaty. But most analyses suggest that it was directed against high unemployment, magnified by the perceived threat to jobs from the new Central and Eastern European EU members. Naturally, Chirac immediately reaffirmed his faith in the French economic model.

  The most undeniable implication of the French vote has been to raise a large question mark over the future of the EU's traditional integration project. Rather than admit any such thing, Chirac hurried to meet German Chancellor Gerhard Schr鐰er, so that they could jointly reaffirm their traditional alliance as the spiritual leaders of this European project, in the hope that the constitutional treaty might yet be rescued. Neither of them have been able to say how this should be done.

  The British government tried to wriggle out of taking sides on the implications of the French and Dutch votes by saying that it would suspend its own plans for a referendum, but not cancel it outright. But if the government thought that this mid-way position would finesse its European predicament by appeasing the large anti-European majority in the UK without gratuitously offending the EU's other members, it was quickly disabused.

  One consequence of last year's enlargement is that it is forcing a far-reaching renegotiation of all aspects of the EU budget. Most of the 10 new members are much poorer than the old members, and are thus much less able or willing to pay large financial contributions. They expect to be net financial beneficiaries, which would help them modernize.

  But the old member states that have hitherto benefited most from the budget -- poorer countries like Spain, Greece, and Portugal -- want the budget to be expanded, so that they can continue to receive money. Old member states that have traditionally contributed most, like Germany and the Netherlands, want to keep the budget as small as possible.

  Given this looming negotiation between old and new -- and between rich and poor -- and because Chirac has no cunning proposal for resurrecting the EU constitution, he has sought and found a second scapegoat: Britain has, for over 20 years, benefited from a large rebate in its outsized contribution to the EU budget.

  By design the EU Common Agricultural Policy (CAP) gives large financial benefits to countries with large farming sectors, like France, but imposes financial penalties on countries with small farming sectors, like Britain. This inequity long rankled in Britain. In 1984, then prime minister Margaret Thatcher demanded and got a large rebate in the British net contribution, which this year is worth roughly ?5 billion (US$9 billion). Ever since, this concession has been resented by other member states.

  Last week, Chirac decided to raise the stakes in the European crisis by going on the offensive against Britain. The time has come, he said, for "our English friends" to understand that they have to make a gesture of solidarity, and renounce the rebate negotiated by Thatcher.

  The British government's first reflex was to reject any suggestion that the British rebate is open to discussion: it was justified in 1984, and it is justified today. But British Prime Minister Tony Blair has now gone on the counter-offensive, raising the stakes himself. Britain, he says, might be prepared to put the British rebate on the table, but only if the French are prepared to remove the reasons for it by means of a radical renegotiation of EU farm policy.

  From a narrowly British perspective, this might seem a shrewd and reasonable posture for defending British interests. But, by picking up Chirac's challenge, Blair has allowed himself to be drawn away from the general European dilemma (what to do about the constitutional treaty) -- for which Britain is not to blame -- to a specific policy problem (the CAP's finances) on which Britain is isolated.

  Coming from anyone else, Blair's proposal to re-think the CAP might seem reasonable; indeed, over the years, the EU has tried (slowly) to reform its defects. Unfortunately, in eight years of power, Tony Blair reinforced the widespread impression in the rest of the EU, that the UK is irremediably skeptical about European integration. His proposal will thus be seen for what it is, a counter-attack on a founding policy of the European project.

  The danger is that this week's EU summit will not be devoted to finding a solution to the dilemma of the French and Dutch "no" votes, but instead will be turned into a confrontation between Britain and the rest about the budget. This would be a pity for Europe and for Britain. It would underscore the depth of the chasm between leaders who are seeking to advance the cause of European political integration but are out of touch with their electorates, and the British, who do not like European political integration at all.

  Ian Davidson is an adviser to, and a columnist for, the European Policy Center, Brussels. A former columnist for the Financial Times, his most recent book is Voltaire in Exile.

  Copyright: Project Syndicate
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