Paul Taylor

Mr Who for EU president? EU seeks anyone but Blair

October 29, 2009

blairWho will be the first president of the European Council of EU leaders? Anyone but Tony Blair. That is the only clear message to emerge from a European Union summit, where the appointments of the EU’s two new senior office-holders is not on the agenda but is on everyone’s mind.The appointment process is typical of the surreal way in which the 27-nation bloc does business. The job is poorly defined in the Lisbon treaty reforming the EU’s institutions, which is expected to come into force in the next few weeks.  But it is clear that most leaders are looking for a consensus-building summit chairman rather than a high-profile president of Europe.There are no officially declared candidates. But Blair has been the front-runner for months, with the public backing of French President Nicolas Sarkozy and of the British government. He was not in Brussels on Thursday, but his name was at the centre of debate in the summit corridors, with many people determined to kill his phantom candidacy off.Before the summit began, his erstwhile European Socialist comrades agreed, according to Spanish Prime Minister Jose Luis Rodriguez Zapatero, that they would prefer the EU foreign policy chief job to go to a socialist. That effectively ruled out the presidency for Blair, since the Socialists have no chance of getting both jobs.Veteran Luxembourg Prime Minister Jean-Claude Juncker meanwhile announced he is available for the top post even though he acknowledged he had little chance of getting it. Juncker’s kamikaze candidacy looks like a suicide mission to blow Blair out of the race. The two have been engaged in a long personal vendetta fuelled by Blair’s blocking of Belgian Prime Minister Guy Verhofstadt’s bid for the European Commission presidency in 2004, and his veto of an EU budget deal brokered by Juncker in 2005.In British eyes, Juncker personfies “old Europe” — a federalist from a tiny country which prospers as a sort of giant safe-deposit box at the heart of a Franco-German Europe. For Juncker, Blair embodies London’s arrogant detachment from the EU. Despite his pro-European rhetoric, the founder of New Labour never brought his country into the euro single currency or the Schengen zone of passport-free travel in 10 years in power. “This is not about personal glory or an extended ego trip,” Juncker told the daily Luxembourg Wort in a clear swipe at Blair’s undeclared bid.The likelihood is that neither Blair nor Juncker will find broad enough support among EU leaders, effectively cancelling each other out. That will open the way for a more consensual, insipid figure without either Blair’s globe-trotting stardom or Juncker’s federalist outlook. Several such potential candidates were preeening themselves at the summit.Dutch Prime Minister Jan-Peter Balkenende, a centre-right Harry Potter look-alike devoid of charisma, was doing his best to charm Sarkozy and Merkel during the public photo opportunities. French Prime Minister Francois Fillon, whose second-fiddle role to Sarkozy means he rarely attends EU summits, was seated beaming in the limelight at the summit table in place of the French foreign minister.Away from the summit, former Finnish Prime Minister Paavo Lipponen published a timely article in the Financial Times saying the president’s job should be about interrnal consensus-building rather than external representation (in other words — “me, not Blair”). The Baltic prime ministers agreed to seeksupport for former Latvian President Vaira Vike-Freiberga as EU president.In reality, the choice is likely to boil down to one of a handful of leaders sitting in the room. My money is on Balkenende as the grey man with the fewest sworn enemies. Under his premiership, the Netherlands has turned increasingly Eurosceptical and voted against ratifying the EU constitution in a referendum in 2005. But unlike Britain, it is a full member of all EU policies.That may seem a pretty thin qualification to be the first president of the European Council,  but curiously, no one in Brussels seems to hold Dutch Euroscepticism against Balkenende the way they hold British Euroscepticism against Blair.

Deja vu on EU budget reform: Paul Taylor

October 27, 2009

PARIS, Oct 27 (Reuters) – The European Commission has fired the first shot in what promises to be a bitter battle over reform of the EU budget with a draft proposal to shift spending from agriculture towards climate change and energy security.

The idea of reallocating Europe’s collective resources away from what many would consider wasteful handouts to grain barons towards priorities such as clean energy may not seem contentious. But this goal risks falling victim to another Franco-German stitch-up to keep farmers’ snouts firmly in the European trough.

The EU budget generates strife out of all proportion to its size. If 125 billion euros ($188 billion) sounds like a lot of money, it is less than 1 percent of the bloc’s gross domestic product, or roughly one-fortieth of national budgets. The Common Agricultural Policy — the oldest EU spending programme, created in the 1960s to promote self-sufficiency in food production — swallows some 40 percent. Aid to poorer regions accounts for another 35 percent, with the rest sprinkled among research, assistance to east European and south Mediterranean neighbours, development and humanitarian aid.

Every seven years, member states engage in trench warfare over how to allocate resources. This pits rich western states against poorer eastern ones, and nations where the farming lobby is powerful such as France, Italy, Poland, Spain and Ireland against service economies such as Britain, Sweden and the Netherlands.

Given the huge strains on public finances wrought by the financial crisis, there will be less rather than more money to share around in the next long-term budget for 2014-20.

With unanimous agreement required, the French are skilled at marshalling support from fellow farming countries in the tortuous negotiations.

Germany, the EU’s biggest paymaster, is keen above all to curb overall spending, while poorer newcomers in central and eastern Europe want the richer states to keep funding catch-up infrastructure projects such as motorways, railways and bridges.

The Commission proposes redirecting EU money towards hi-tech projects to boost growth and employment, smart energy networks and the fight against global warming. This would have broader public support in many countries than subsidising farmers.

It suggests farm payments could be co-financed from national budgets in future and targeted towards meeting low-carbon environmental standards. This is sure to infuriate France, the biggest beneficiary of the CAP, which sees farm subsidies as a vital national interest.

Even though agriculture accounts for less than 4 percent of GDP and 3 percent of jobs, farmers’ unions can usually count on public sympathy for their sometimes violent protests, and wield disproportionate political clout.

Brussels is right to suggest abolishing the hybrid system of funding the EU from customs and excise revenues, a share of value added tax and a proportion of national income, which fuels endless rows about countries’ net balances.

Public hostility makes any idea of a "Euro tax" unfeasible. But the Commission’s idea of using the proceeds from auctioning carbon dioxide emissions permits to finance the EU budget makes sense. It would also remove the wretched dispute over Britain’s budget rebate which has poisoned EU politics since the 1980s.

Member states would still set the overall budget ceiling and allocate spending among key policy areas jointly with the European Parliament.

The main problem with the Commission paper is the likelihood that it will be crushed by political realities. A similar blueprint for a fundamental overhaul of EU spending by a blue-ribbon panel headed by Belgian economist Andre Sapir in 2003 was quickly buried due to French-led opposition.

French President Jacques Chirac and German Chancellor Gerhard Schroeder had met in a Brussels hotel the previous year and agreed to keep EU farm spending constant for the next decade, pre-empting the budget negotiations. In return, France agreed to cap the overall EU budget at 1 percent of GDP.

"As it stands today, the EU budget is a historical relic," the Sapir commission wrote. "Expenditures, revenues and procedures are all inconsistent with the present and future state of EU integration."

Sadly, the latest attempt at reform looks like deja vu all over again. (editing by David Evans)

Germany does its bit for global rebalancing: Paul Taylor

October 26, 2009

PARIS, Oct 26 (Reuters) – Germany’s centre-right coalition
has chosen a bold economic recovery strategy starting with
unfunded tax cuts that amount to a third stimulus programme and
should be welcomed around Europe and in Washington.

Berlusconi must not take Italy down with him: Paul Taylor

October 9, 2009

PARIS, Oct 9 (Reuters) – Silvio Berlusconi seems determined
to take Italy’s institutions down with him as he sinks slowly
into a swamp of lawsuits and scandal. But his political allies
should not tie their fate irrevocably to his.

A green industrial policy for Europe?

October 7, 2009

Does this sound like “forward into the 1980s”?True to their dirigiste tradition, the French are cooking up a green industrial policy for Europe which they want to build around Franco-German projects for electric cars, smart energy networks and aerospace technologies.The idea of industrial policy has been given new life by the credit crunch and a loss of confidence in the efficiency of markets: European Commission President Jose Manuel Barroso has promised “a fresh approach to industrial policy” in his second term in office.But whether the new centre-right German government will embrace France’s plan when it takes office next month remains to be seen.President Nicolas Sarkozy wants a European Union programme of high-tech low-carbon projects to help pull the economy out of a slump and drive stronger growth. He plans a big public savings bond in France to fund “the technologies of the future” in life sciences and healthcare, energy and the environment, information and communications.Public finance and regulation can channel investment, create infrastructure and develop scientific know-how. But the EU has good reason to be wary of trying to pick technological winners or engineer industrial champions.Paris has long accused Brussels of blocking a pro-active industrial policy by what it sees as dogmatic application of EU competition rules on mergers, public procurement and state aid, and a naively open door to foreign trade.For example, Sarkozy wants European utilities to pool their purchasing power and negotiate joint long-term gas supply deals with Russian monopoly Gazprom, something France says EU cartel rules currently prevent.In France, the state’s guiding industrial hand is associated with technological successes such as Airbus planes, Ariane rockets and TGV high-speed trains, which became commercially viable only after years — in some cases decades — of public subsidies. Costly white elephants such as the Bull computer group or a 1970s scheme to develop oil-detecting aircraft, nicknamed “sniffer planes”, tend to be forgotten.In Britain, industrial policy is associated with commercial disasters such as the Concorde supersonic aircraft, or the loss-making nationalised industries of the 1970s. However industrial policy is making something of a comeback under business secretary Peter Mandelson, who favours using public money to promote electric cars or carbon capture and storage.Germany sits between the two traditions. It is wary of state intervention in the private sector but supports big industrial ventures by German firms. Chancellor Angela Merkel has given priority to raising investment in research, innovation and higher education, raising French hopes of joint initiatives.Europe’s post-war economic recovery was built partly on the pooling of the French and German coal and steel industries in the European Coal and Steel Community. Today, both countries are committed to maintaining an industrial manufacturing base.Pooling scarce public R&D resources in defence and aerospace programmes and clean energy technology makes sense. The French are right to think that if they can get Germany on board, their new industrial policy has more chance of success and of winning EU acceptance.But they need to remember that it is companies, not governments, that make successful products. The Germans should restrain the French temptation to play “industrial Meccano”.

A green industrial policy for Europe? Paul Taylor

October 7, 2009

PARIS, Oct 7 (Reuters) – Does this sound like “forward into
the 1980s”?

True to their dirigiste tradition, the French are cooking up
a green industrial policy for Europe which they want to build
around Franco-German projects for electric cars, smart energy
networks and aerospace technologies.

Italian pragmatist vs German hawk in ECB race:Paul Taylor

October 5, 2009

PARIS, Oct 5 (Reuters) – The race to succeed European
Central Bank President Jean-Claude Trichet is out in the open,
pitting a pragmatic Italian against an old-school German
inflation hawk, two years before the Frenchman steps down.