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A fractured Europe
By George Parker and Quentin Peel
FT.com site; Sep 16, 2003

Seldom have the politics of Europe seemed more confused and confusing. In the last months before the European Union expands from 15 to 25 member states, the voters are sending out mixed messages to their leaders and the rest of the world.

In Sweden, the electorate has resoundingly rejected joining the eurozone as a full member, in a poll widely seen as a vote of no confidence in closer European integration.

Yet across central and eastern Europe, seven out of eight new members from the former Soviet bloc have voted by large majorities in favour of joining the Union. The last, Latvia, is holding its referendum on Saturday.

The EU is a club that new member states clearly want to join. Romania, Bulgaria and Turkey are in the queue to come next and all three are as enthusiastic as the most pro-EU of current members, such as Luxembourg, the Netherlands and Ireland.

But tensions in the existing club are also growing: between big member states and small, between new members and old and between the wealthier northern fringe, who pay big net contributions to the budget, and the poorer southerners such as Greece, Spain and Portugal, who still receive large net subsidies. The prospect of enlargement, scheduled for May 2004, has aggravated those divisions by bringing so many less prosperous countries into the Union all at once.

It presents a huge challenge to leaders of the 25 current and would-be members of the Union, at a critical moment. In less than three weeks' time they will embark on the final drafting of a new constitutional treaty, intended to provide a single framework for the Union. It is supposed to ensure that the EU remains both democratic and effective after enlargement.

At the same time, the heads of government are struggling with the consequences of profound divisions over transatlantic relations, following the war in Iraq. Most new member states have lined up with Britain, Italy and Spain in support of the US-led action, against strong opposition from founder members such as France and Germany.

Last, sluggish growth in the eurozone has compounded tensions between the large and small countries participating in the single currency: France, Germany and Italy seem set to break the strict fiscal stability pact that underpins the euro, causing sharp resentment among the smaller members, which have successfully tightened their belts and cut spending.

The challenge for EU leaders is how to reconcile the conflicting demands on their institutions from both Euro- enthusiasts and Eurosceptics. Can they draft a constitution that will win support from old and new members alike? And can they gain popular support for what is, by definition, a project designed by a European elite?

Sweden's resounding rejection of the euro on Sunday, by 56 to 42 per cent, has provoked a bout of uncertainty and recrimination in European capitals and the corridors of Brussels. It confirms recent experience in both Denmark and Ireland that when voters are asked a European question in a referendum they answer either No, or a very narrow Yes.

The referendum has sparked fears that if the future constitution is put to the vote, at least some of the 25 members will say No - and bring the whole project to a halt. Any new treaty has to be approved unanimously by the enlarged EU.

The forthcoming intergovernmental conference (IGC), to be launched by Silvio Berlusconi, the Italian prime minister, on October 4, has the formidable task of reconciling Europe's divisions. Mr Berlusconi, whose own erratic style has already upset many of his European partners, will have to perform a supreme diplomatic balancing act if he hopes to complete the conference by the end of Italy's EU presidency on December 31.

The most serious divide he has to bridge is between the largest member states, including France, Germany and Britain, as well as his own, and the smaller ones. It is a dispute that has been brewing for years, as smaller countries such as Belgium, Austria, Finland and Portugal have built up resentments over the perceived bullying of the big countries.

The squabbles came to a head after the last IGC, culminating in the treaty of Nice, which left the small countries fuming at institutional reforms they saw as forced through by France, Germany, Britain, and Spain, in particular. The latest attempt at a new constitutional settlement is in effect an effort to heal that divide. But it has been aggravated by the splits over the stability pact, the fiscal rules underpinning the euro.

The second split is between north and south - the net budget contributors and the net budget receivers. With the advent of so many poorer new members in the east, that tension over cash is certain to grow, pitting east against south and both groups against the north.

There is a particular problem for the two "almost big" member states - Spain and Poland - which fear they will lose votes under the new constitution and be relegated to the second rank of small and medium members.

The third divide is between new member states and old, aggravated by the disputes over Iraq. The former Soviet bloc members all backed the US-led invasion, along with Britain, Spain and Italy, and against the objections of EU founder members such as France and Germany.

And behind it all lies another profound but essentially psychological split: between the six founder members (France, Germany, Italy, the Netherlands, Belgium and Luxembourg) on the one hand; the late-comers who joined after 1973 (Britain, Denmark and Ireland, Greece, Spain and Portugal, and finally Austria, Finland and Sweden); and the new member states who will join next year.

The six founder members are all inclined to accept most if not all of the draft constitution prepared by the convention on the future of Europe, which is now supposed to be fine-tuned at the forthcoming IGC. But they are also increasingly tempted by talk of a "two-speed" or "variable speed" EU.

Joschka Fischer, the German foreign minister, signalled on Monday that he was not prepared to wait for the message of closer European integration to reach Eurosceptical voters in northern Sweden. He is convinced that support for EU integration remains solid in the heart of the Union and those countries wanting closer ties in the eurozone, or in defence co-operation, should move ahead anyway.

The eurozone is already an example of a two-speed Europe, although only Britain, Denmark and Sweden remain outside. Defence is another area where France and Germany think it could be pursued. But the idea is anathema to others - above all the new member states.

"The idea of a core Europe, a two-speed Europe, is extremely dangerous for a country such as Poland," says Janusz Reiter, president of the Centre for International Relations in Warsaw. "It is bad for both psychological and political reasons. It creates a feeling of alienation in Poland towards Europe.

"Even now it is very difficult for people in Poland to develop a sense of being part of the game. If we do not identify with Europe, we have no sense of duty. It would create a new group, between core Europe and an outer circle."

Insiders believe new members such as Poland will not be ready to join the single currency for many years. Until last year the new members themselves expected to be admitted quickly. Now they admit it will take longer - but they take it for granted that membership will come sooner rather than later.

The second area of tension at the IGC over a two-speed EU is likely to come over defence. The convention, under the presidency of ValÚry Giscard d'Estaing, has suggested that it lends itself to "closer co-operation" between some but not all member states. That is rejected on the one hand by countries such as Britain and Poland, fearful of France's seeking to set up an alternative military structure to the US-led Nato alliance. On the other hand, it is also feared by the neutral member states, such as Ireland, Finland and Austria, which do not want to see the EU acquire a muscular military arm in their name.

Much of the draft treaty is designed to simplify the EU, to ensure it remains capable of decision-taking after enlargement and to make it more transparent. It also creates high-profile European jobs, such as a new European president and a foreign minister. It is supposed to streamline the increasingly cumbersome European Commission, reducing its full-time members to just 15. And it will end the six-month rotation of the EU chair between the member states. dh,4,11.05m,GSG1451,M ll those reforms have widened the big-small divide. Fifteen of the smaller members (notably not including Belgium, the Netherlands and Luxembourg, of the Founding Six), met in Prague this month to try to hammer out a common line towards the treaty negotiations. All reject the idea of not having a full Commission member for each member state.

Most dislike the idea of a full-time president of the European Council. They will try to clip the wings of the new president, because they fear he or she will become a spokesman for the big member states.

On the other hand, Britain, France and Germany are showing signs of co-ordinating their rival position. With the treaty negotiations less than three weeks away, the EU's three most powerful leaders - Gerhard Schr÷der, Jacques Chirac and Tony Blair - will discuss a common strategy in Berlin on Saturday. JosÚ Mara Aznar of Spain will then be briefed by Mr Blair on Sunday.

The big countries are expected to discuss the role of the proposed EU president - a new post they all support - as well as the more divisive issue of defence co-operation.

Whether the big countries can agree on common positions on many issues is still in doubt. Britain and Spain have severe reservations on important questions that are not shared by the founder members. The mood is also bad.

Ana de Palacio, Spain's foreign minister, made no bones about her concerns about the "nostalgia of the founder members" at the European Ideas Network, a centre-right summer university meeting in Madrid last weekend. "We are no longer just a union of six members," she said. "Europe was built . . . to ensure there would be no room for war [again] between France and Germany. Therefore France and Germany are crucial actors in any European integration. But there must be no nostalgia and no hijacking of the EU."

Yet old EU hands make no secret of their frustration at the difficulties of maintaining a functional EU with so many new sceptical members.

Philippe de Schoutheete, former Belgian permanent representative to the EU and now an adviser to the European Commission on the constitutional negotiations, believes the Swedish result is not entirely negative.

"We do not want people in [the euro] who are half-hearted," he says, "or who are there for the wrong reasons.

"The plague of Europe for 30 years has been that Britain and Denmark joined on false assumptions: [they believed] it was all economic and not political. It is better not to have countries in the eurozone [that] are there reluctantly."

The movement towards a hard core EU is, he argues, already "irresistible". "The choice is whether we want this reinforced co-operation in the framework of the Union, or outside. For example, the neutrals want defence co-operation to happen outside the Union. That would not be a good idea."

If Europe's leaders do succeed in reconciling their differences in the IGC, they still have to to engage the public in the debate about the new constitution. But Sir John Kerr, the veteran British diplomat who helped to run the constitutional convention, admits that the debate hardly travelled beyond Brussels. "It was my single biggest regret," he says.

Some countries will have to ratify the new treaty with potentially fraught referendums, including the Danes and Irish. Others including France, Spain and Italy are considering doing the same.

A spokesman for Romano Prodi, European Commission president, admits it will be a "huge challenge for our communication efforts" to sell the treaty. If it is not ratified, Europe faces the messy choice of grinding to a halt or possibly having to expel one of its members.

The Swedish experience revealed the problems of securing a Yes even when the entire political and business establishment supports the cause. Ireland's political and business elite also failed to mobilise the Irish to vote Yes to the EU's Nice treaty in 2001.

If Europe's voters distrust their own leaders, asking them to support a project run by a more distant elite in Brussels is doubly problematic, especially when national governments increasingly seek to demonise the European Commission, the EU's executive.

Pascal Lamy, the EU's trade commissioner and a French national, this month rebuked Jean-Pierre Raffarin, the French prime minister, for ridiculing the Commission for doing its legal duty to uphold the EU's stability pact. "Characterising Brussels as a heartless Scrooge, obsessed with accounting and punctiliously enforcing rigid rules, is a bit facile," he said.

Mr Schr÷der in effect ran against Brussels during his campaign for re-election last year, claiming the Commission did not understand the needs of German industry.

The British government routinely trumpets its "victories over Brussels". Last week Gordon Brown, the chancellor of the exchequer, told reporters how he had saved Britain's sales-tax exemption for children's clothes from the Commission's clutches.

John Palmer, of the Brussels-based European Policy Centre, says the time has come for a more positive approach to engage citizens in the merits of the European project. "The EU had to be constructed by governments acting together as a club. Integration now has to be driven from the bottom up."

Yet the problem comes back to voters who want more Europe and less Europe at the same time. The last Eurobarometer survey suggested that there is no widespread enthusiasm for a truly integrated "federal" Europe. At the same time they are clearly enthusiastic about more common policies. Particularly clear was support for both more common foreign policies and more common defence policies, between all 25. Indeed, the UK was the only member state without a majority in favour of the former, and it did have a majority for the latter.

The new member states bring in different interests. They are less keen on environmental protection, for example, and immigration. Their overwhelming concern is about being successfully integrated into the Union. But they do not want to be second-class members.

The EU faces a tough choice. It could either let the founder members co- operate ever more closely, while others stay outside the process; or it could simply move at the speed of the slowest. The latter seems likely to be unacceptable to too many countries. Some sort of variable speed Europe is looking increasingly probable, whether the new members like it or not.

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