Britain’s Presidency of the EU: All Change or Plus ça Change…?

Britain’s Presidency of the EU: All Change or Plus ça Change…?

Theme: The British presidency of the European Union (EU) coincides with the most profound crisis in the organisation’s 50-year history. Tony Blair has initiated an ambitious agenda for debate in the search for solutions but, on a number of issues, he will find it difficult to achieve a consensus for change.

Summary: The United Kingdom holds the presidency of the EU from June to December 2005. Following the collapse of the process to ratify the constitutional treaty, and the failure of the Brussels summit in June to agree the principles of the 2007-13 budget, profound questions are being asked about the future direction of Europe. Blair will attempt to use the British presidency to promote his opinion that there is an urgent need for reform in the EU –in particular economic reform– if Europe is to become more competitive in the global economy of the 21st century. To achieve this Blair will go further than ever before in pressing for action on the Lisbon agenda and a wide-ranging review of social policy.

But the British Prime Minister will find it difficult to achieve his desired goals. There are profound disagreements across a range of issues, from financing the EU to Turkish accession. Domestic political pressures in various member states and a historic lack of engagement in Europe on the part of successive British governments are powerful factors that will limit a successful outcome. There is a danger for Blair that he will be judged to have under-performed if concrete changes do not materialise from the ambitious agenda which he has set. His own comment that ‘the one thing that everybody in Europe would agree on is that this is an interesting moment to take on Presidency of the European Union’ may turn out to be the extent of the consensus.

Analysis: In their pre-planning, the British calculated on a low-key presidency. With his own difficult referendum on the Constitution scheduled for 2006 Blair’s main aim was to limit further controversy or damaging debate about Europe at all costs. The British Prime Minister sought a workmanlike presidency. He wanted solid results that he could present to the British people as proof positive that Europe was working in areas such as economic reform and a co-ordinated counter terrorism policy. But when the French and Dutch rejected the constitutional treaty, and the last European Council collapsed in unprecedented acrimony (with Blair in the centre), Britian’s softly-softly approach to their presidency collapsed with it.

In a dramatic about turn Blair went to the European parliament at the end of June and presented himself not as temporary watchkeeper but as the potential saviour of a European Union. From being a low-key affirmation of the benefits of the EU, the British presidency was now being talked up as a rescue operation for a Europe in crisis. The speech set a tone and raised expectations but was short on detail. It was a personal triumph for Blair but, as so often with the British Prime Minister, the dazzling presentation disguised a lack of concrete proposals.

To the hasty refocusing of the British presidency and the uncertainty of the constitutional and budgetary crisis, there must now be added two more important ‘known unknowns’. The first is the possible election of Angela Merkel and consequent policy changes in Berlin. The second is the extent to which President Chirac will be further debilitated by his ‘vascular accident’. Taken together, these factors make predictions about the outcomes from the next few months unusually difficult and it may well be that the British term will end in December as little more than a well-intentioned ‘mood music’ presidency.

The British agenda for the next six months gives priority to four themes:

(1) Economic reform.
(2) Financing and the EU budget.
(3) Europe’s global role.
(4) Security.

These will be discussed during the usual formal and informal European councils but the most important meeting of the British presidency will be an ‘informal summit’ for heads of state in October. Following the collapse of the ratification process of the constitutional treaty this summit will open up a wide-ranging macro-debate about the whole European project. More than any other event during the British presidency the outcome of this meeting will determine the extent to which Blair is able to change the dynamic within the EU. The summit will discuss, in the Prime Minister’s words, ‘how Europe makes progress in the future and how we give energy and commitment to the European project’.

The British will try to focus the debate the first of the priorities –the economic supply-side reforms– which they believe are necessary to make the European economy more competitive. Many of these are contained in the Lisbon agenda (2000) which was pioneered by Blair and José María Aznar. This set ambitious targets for growth and employment in the EU, to be met by 2010, with member states agreeing a series of measures to complete the single market, stimulate research, development and investment and reform the labour market. In addition, the Commission has now been charged with drawing up a paper on the sustainability of the European social model in the light of increased global competition.

At the informal October summit, Blair will reiterate his view that economic efficiency and social justice are complementary not contradictory. It is a favourite New Labour theme that people in Britain have heard many times before. In his speech to the European Parliament Blair argued ‘it is not much of a social Europe when there are 20 million people unemployed’ and he and his ministers have sought to promote Britain as a role to follow.

Unemployment in the UK (4.7%) is around half the EU average and participation in the labour market is high (71.6%). Some 26.2% of people in Britain voluntarily work part time (which allows many more women in particular to balance the demands of work and family care) and youth unemployment (12.1%) is around half that in France (22%). The Foreign Minister, Jack Straw, has identified the more flexible labour market as an essential element and that many people ‘enjoy greater benefits from a social Britain than they did 10 years ago… because most of them are in work and prosperous (compared to) many of their counter parts in Europe’.

Despite the evident benefits in Britain, Blair will find this a difficult debate to win and domestic political pressures will also lead other governments to proceed with caution. For example, the reforms of Chancellor Schroeder’s Agenda 2010 looks as though it will, in fact, lead to his own departure from office in 2005 and President Chirac has seen his government paralysed by his attempt at mild pension reforms. In Spain, unemployment is consistently listed as the most important concern of Spanish voters and is, along with the high percentage of short-term contracts, a central problem in the Spanish economy. Moncloa is analysing the British labour market to see what measures, if any, can be adopted in Spain but will be acutely aware that attempts by the previous (Aznar) government in 2002 led to the first general strike in Spain for a decade.

None of this should come as a surprise in London. Reforms to the British labour market were made at enormous social cost in the 1980s by Margaret Thatcher and all were opposed, at the time, by Tony Blair and the Labour Party. Current British ministers should remember this and will need to ensure that they adopt the right tone: lecturing their European colleagues on ‘the British model’ will simply be counterproductive.

Blair will have greater success in pressing for action on other parts of the Lisbon agenda that are in need of fresh momentum. A depressing mid-term review of the Lisbon goals by former Dutch premier Wim Kok reveals that little progress has been made. Unemployment in the EU stands at 20 million (of whom just under half are long-term unemployed) and the EU growth rate has remained sluggish at 2% between 1999 and 2004 compared with, for example, 3% for the same period in the US). International comparisons are invidious due to important differences in demography and working hours but it is beyond dispute that relative declines in European competitiveness and productivity are problems that need to be addressed.

Tony Blair is now concerned to revive the Directive on Services in the Internal Market (Bolkestien) to improve competitiveness. Services are the dominant sector of the EU economy: they account for over two-thirds of the annual GDP and some 116 million jobs –or 68% of the active workforce– compared with a total of 33 million jobs in the manufacturing sector. The free movement of goods has been successfully enshrined in the internal market since 1992 but the service sector has not followed. It accounts for only 20% of cross-border trade within the EU and there are a multitude of barriers that prevent service companies or workers in one EU country selling their skills in another. The failure to complete the single market in services is one of the main reasons for poor economic growth within the EU.

Tony Blair has long been an enthusiastic proponent of the Services Directive but, ironically in the event, agreed to drop the discussion at the EU summit in March 2005 in order to help President Chirac in the French referendum campaign. (One of the themes exploited by the ‘no’ campaign was the fear of an invasion by Polish plumbers). The British Presidency will now revive the Directive and again argue forcefully that this is an essential step towards completing the single market, but opposition from other member states has, if anything, hardened further since then.

The British enthusiasm for a Europe-wide free market in services has become bound up with several other factors, leading to the development of an unprecedented fault line within the EU. French leaders Chirac and Villepin have expressed their fear that the British would quietly like to bury the EU as a political entity with a social dimension and leave it as little more than a free trade zone. They cite, for example, British failure to enter the Euro, support for Turkish accession and traditional support for ‘widening’ rather than ‘deepening’ the EU (see below) and proposals for budgetary and financial reform. As Chirac, his rivals and potential successors manoeuvre for position ahead of the French Presidential elections this opposition represents a serious problem for the ambitions of the British presidency.

The last European Council the debate about EU finances led to acrimonious exchanges as Blair made the end of the British rebate (cheque británico) dependent on reform to the Common Agricultural Policy. Discussion about EU finances and the budget is the second of the four priorities of the British presidency and whilst nothing will be definitively resolved during this semester it will be raised at the informal October summit. Blair will seek an agreement in principle that funding in the next budget round (2007-13) will move away from agriculture and into research and development for two reasons. First, agricultural subsidies are an unfair distortion of trade that damages developing countries in, for example, Africa (see below). Secondly, the EU needs to invest far more in education, training, research and development if it is not to fall further behind the US.

But a major diplomatic effort by the British will be needed for Blair to achieve the outcomes he is looking for on the priorities of economic and financial reform. Large net contributors, such as Germany, have made it clear that there will be no new money and powerful lobby groups will oppose the switching of funds.

The Spanish Prime Minister, José Luis Rodríguez Zapatero, could play a pivotal role in the budget negotiations. Currently the largest net recipient of EU funding, Madrid has indicated that it accepts the logic of reducing agricultural subsidies but wants an increased share of money for research and development. An impediment to this is the poor quality of research in many Spanish universities and standards will need to improve rapidly if Spain is to qualify for these funds.

Zapatero will be an even more certain Blair ally in the debate about economic reform. After a Downing Street lunch with Blair in July 2005 Zapatero spoke with enthusiasm about economic reform and said simply ‘Lisbon cannot wait’. These words are being reinforced by action: member states are due to submit further plans for implementation to the Commission for approval in October and sources suggest that Spain is amongst the most advanced. Madrid is officially agnostic about the Directive on Services but will probably support the British position. If he does this Zapatero will cement the new relationship that he has forged with Blair over the summer and prove that he is an important player in the formation of European policy. It is essential that he does not repeat his low-key performance of the last European Council meeting.

The third presidential priority will be Europe’s role in the world and here discussion will centre on six specific areas:

(1) Development in Africa.
(2) Climate change.
(3) The Doha development agenda.
(4) The Middle East.
(5) The reform of the EU sugar market.
(6) Relations with Russia and the Ukraine.

Assisting the developing economies of sub-Saharan Africa is a personal mission of the British Prime Minister who has described the continent as ‘a scar on the conscience of the world’. Blair has already used Britain’s presidency of the G8 to lobby for debt relief in Africa and for a variety of reasons it is one of the areas on which he will want to make further progress before he leaves office. Generally, British involvement in Africa is extensive. Rooted in the Imperialism of the 19th and 20th centuries many member states of the British Commonwealth are in Africa. Several members of the government, including Blair himself, have direct, personal links with Africa.

The moral and economic case for intervening in Africa is unanswerable but it is unlikely that many other EU member states will have the same degree of enthusiasm as the British. One of the earliest examples of Blair’s willingness to intervene militarily in other countries occurred in 1998 when he sent British troops to protect the civilian population in Sierra Leone. An appeal from London at the time to other EU member states to support this effort met with little response. But the crisis in Niger when Africa is supposed to be at the centre of world attention is probably the most telling comment on the difficulty which Blair faces if he is to make a real change in the continent.

One important measure will be the extent to which developing countries in Africa and elsewhere are allowed to compete fairly in agricultural markets. The real extent to which a reduction of European tariffs will benefit Africa is debateable. Nevertheless, Blair has said that he would like to set a date for ending agricultural subsidies at the Hong Kong meeting of the Doha round of the WTO in December where he will be representing the EU. Once again the difficulties appear to be formidable. Whilst it will be difficult to reach a consensus on phasing out CAP subsidies in Europe (see above) agreement from Washington looks impossible. Whether there is any significant progress in Hong Kong will be a real test for the British presidency.

More generally, all these meetings are important and necessary but raise the wider issue of EU foreign policy. The call on Presidential resources and the time needed to pursue a schedule like this has now become very demanding. Solely in terms of international meetings the Presidential timetable is full with EU-third country summits: China and India (September), Russia and the Ukraine (October) and Canada and Euro-Med (November). In addition there will be the ‘informal summit’ (October?) and a full European Council (December), plus the World Trade Organisation meeting on the Doha round in Hong Kong (December). Third country summits are important for the EU but it is questionable if their value can be retained when there are so many of them. It is also questionable if the Presidency can really give them the attention that they deserve on top of the very full domestic agenda and the profound discussions that will take place in the next few months about the very nature of the EU. The need for an EU Foreign Minister, as envisaged in the constitutional treaty, to head foreign policy meetings has never been more evident.

Finally, the British presidency has made the debate about security and the threat from terrorism a priority. At the centre will be uncontroversial measures to improve the coordination of security forces between the member states. There is less consensus about the future inclusion of Turkey in the EU, which is regarded by Britain as a security issue.

London is a very active supporter of Turkish accession but there is significant opposition from other member states. In Germany Angela Merkel has already expressed strong reservations. In France President Chirac has said that any further enlargement should be subject to a referendum of the French people (although he is unlikely to be President if or when the time comes). It is probable that talks with Turkey will begin as planned on 3 October. But it will be a severe blow to the British presidency if there is delay or acrimony from the outset.

Zapatero, like Blair, does regard the Turkish candidacy as a security issue and is in favour of an earlier Turkish accession. It is a logical extension of Zapatero’s call for an ‘alliance of civilisations’ (the Turkish Prime Minister Erdogan speaks of a not dissimilar ‘dialogue of civilisations’). London and Madrid are also working closely together during the presidency to promote dialogue between the EU and other Mediterranean countries.

Britain and Spain have been working closely together to organise a heads-of-state summit in Barcelona in November to mark the signing of the Euro-med charter in the same city ten years ago. The British are concerned to see that this time around there are concrete changes in terms of human rights and democracy in the Arab world. The announcement of a security agreement between France, Spain and Morocco, which will be signed at Barcelona, is an example of the concrete measures which the British will be looking for.

Conclusion: Tony Blair has provided a clear agenda for a necessary debate about Europe’s future but Britain will need to ensure that it adopts a moderate and consensual tone during the Presidency to promote open discussion. The British Prime Minister must avoid any interpretation that might suggest that he is attempting to impose a specific social or economic model on other member states.

The British presidency will be a further opportunity for the social-democratic governments of London and Madrid to consolidate recent steps towards a closer relationship. In particular Blair will seek active support from Zapatero on key themes of the British presidency –economic reform and the Directive on Services, the talks about Turkish accession and the Barcelona process–. These are litmus tests for the British presidency –and for the strength of the relationship between London and Madrid–.

Zapatero will need to ensure that he plays a leading and not secondary role during the debate on the future of the EU at the informal heads-of-government summit in October.

EU-third country bi-laterals and summits are becoming an increasingly important and time-consuming part of each Presidency. A mechanism needs to be found quickly that will enhance EU external relations and allow the Presidency sufficient time to deal with the EU domestic agenda.

David Mathieson
Former Advisor to Foreign Secretary Robin Cook