European Foundation Intelligence Digest, 18th

European economy is worst in industrial world

Contrary to the predictions of economists and governments, the positive growth figures coming out of the US – 2.3% a year – have not had any positive effect on growth in Europe. Germany, Italy and the Netherlands are all in recession and there is little prospect of any change for the better in 2003. On 14^th August, the European Commission added to the gloom when it released its new prediction for growth in the euro zone – a maximum of 0.4% in the third quarter of 2003. The Commission is no longer ruling out the possibility of the euro zone economy simply stagnating and its guess for the last quarter of 2003 is that growth will be between 0.2% and 0.6%. The pessimism has only worsened with the latest figures from Germany, Italy and the Netherlands. According to the German Federal Statistical Office, Europe’s biggest economy remained in recession in the second quarter of 2003, with its GDP contracting by 0.1% with respect to the first quarter and by 0.6% since this time last year. The Netherlands are doing even worse: their economy has not been in such a crisis since 1980. For the third quarter in succession, Dutch GDP has fallen: it contracted by 0.5% between April and June 2003. Over the year, the fall is 0.9%. Given the fact that Italy is also in recession – its economy contracted by 0.1% in the second quarter of 2003 – it is somewhat surprising that the figures for the euro zone as a whole show that the economy there is merely stagnating. The surprise is even greater since the latest figures available for the French economy in the second quarter of 2003 also suggest that GDP there may have fallen by at least 0.1%. All these figures seem to invalidate the theory that an upturn in the American economy will help Europe. Eurostat reports that the difference between the American and the European economies is growing ever greater. Even the comparison with Japan is not flattering for Europe: Japanese GDP rose by 0.6% in the second quarter to reach an annual growth rate of 2.1%. Officials have tried to put the best spin on these terrible figures, but other surveys show that business confidence is low, while of course unemployment continues to rise. [Le Monde, 14^th August 2003]

Economists therefore think that the European Central Bank will be under pressure to cut interest rates further. According to one economist, “The situation now is that the recovery is based far more on wishful thinking than on anything real.” [Handelsblatt, 14^th August 2003]

Germany sent to the back of the class

Germany is rapidly losing its status as exemplary pupil of the European Union where implementation of EU directives is concerned. According to figures published by the European Commission, Germany is now only in eighth place in the league table of the 15 member states of countries for translating EU directives into national legislation on time. German business leaders are alarmed that this is damaging the functioning of the single market. The European policy spokesman of the governing Social Democrats, Günter Gläser, has said that there are two problems in Germany – “the federal system, and the desire to amend EU directives when they are being translated into national legislation.” The federal system means that EU directives have to be approved by the Federal Council (Bundesrat) in which the 16 federated states are represented; they also have to be implemented in state law as well. An example illustrated the problem: the recent EU directive on cable cars was effectively ignored by Schleswig-Holstein because it does not have any mountains. (But why on earth is there an EU directive on cable cars anyway?) The delays in implementation do not, however, concern only Germany: delays rose between May 2002 and May 2003 for the first time ever in the EU as a whole. The number of legal suits, which the Commission has brought for failure to respect the treaties, has risen by 6%. There are 136 cases outstanding against Germany, which puts that country into 6^th place. The countries at the top of the class in this respect are Great Britain and Spain, countries which (apparently) count as “difficult EU partners” (at least in the eyes of the German press). At the bottom of the class is France, which has 220 cases outstanding against it. [Handelsblatt, 19^th August 2003]

German birth rate among lowest in world

The birth rate in Germany, 1.34 children per woman, is 180^th out of 191 countries. Within the EU, Germany is in 11^th place, with Austria (1.32), Greece (1.30), Italy (1.25) and Spain (1.22) coming even lower. The average EU rate is 1.53 children per woman. This has prompted the federal minister for families, Renate Schmidt, to announce new measures to help low incomes families. [Die Welt, 20^th August 2003]

EPP demands Commission’s resignation

As prosecutors in France and Luxembourg continue their investigations into senior officials at the EU’s statistical office, Eurostat, pressure is growing on the Commission itself within the European Parliament. The head of the biggest party bloc in the Parliament, Hans-Gert Pöttering, has called for “responsibility in the Commission” since it is the Commission which is ultimately responsible for what goes on in Eurostat. He told Die Welt that Prodi himself might have to take responsibility, specifically saying that commissars may have to be sacked, just as ministers are sacked in national governments in times of crisis. Three commissars are in the line of fire – Michaele Schreyer, the budget commissar; Pedro Solbes, the commissar for monetary policy who is in charge of Eurostat; and the commissar in charge of reforming the Commission, Neil Kinnock. All three insist that they know nothing about the wrongdoings in Eurostat but Pöttering says this is unacceptable. He added that if the Commission’s anti-fraud office concludes that the commissars made mistakes, “then they must go, if necessary all three of them”. Pöttering points out that Prodi has the power to sack individual commissars; but he says that he rules out an institutional crisis like the one which engulfed the Santer commission in March 1999, when the whole commission “resigned” because of the misbehaviour of one, Edith Cresson. [Andreas Middel, Die Welt, 19^th August 2003]

A source within Eurostat has told the Digest that there are no charges of corruption to answer, but that the institution is being used as a political football between the Parliament and the Commission. Caught on the back foot as the result of cost-cutting measures which it itself ordered – it was these that led to the use of external contractors - the Commission has now over-reacted and is determined that heads roll. Mediocre MEPs are also trying to gain a public profile by demanding action from the Commission, or even the sacking of commissars. Eurostat is therefore caught in the middle, and its own employees are being encouraged to denounce one another to save their own skins.

Majority of Swedes oppose euro

The Social Democratic prime minister of Sweden, Göran Persson, is trying to put a brave face on it. “I am convinced that many people have not yet made up their minds,” he has said, desperately trying to convince himself and the voters that the opinion polls are wrong when they show 45% of Swedes opposed to the euro and only 33% in favour. A referendum on the matter is to be held on 14^th September, and the opponents of the single currency have continued to gain ground during the summer months. The prime minister’s own attempts to convince his countrymen of the virtues of the euro seem to have proved unsuccessful. This is not least because, a year ago, following parliamentary elections, Persson appointed five anti-euro cabinet ministers, in an attempt to heal the divisions within his party. These ministers have been happily campaigning alongside anti-euro politicians, opposing their own boss, the prime minister. Only recently has he tried to rein them in. The result has been that for the last two weeks, the Swedish press has been talking of little else than Persson’s attempt to muzzle his ministers, rather than about the euro itself. The other strategic miscalculation is longer-term, and resembles that of Tony Blair. Sweden, like Britain, has adopted a “wait and see” attitude, saying that the euro is a high-risk project. Persson has also – again like Tony Blair – being stressing how much better off Sweden is than other European countries. This is not much of an advertisement for the euro. The Swedish Left now sees adoption of the euro as a danger for the Swedish social security system because the Swedish government would lose its financial independence. If the Swedes vote No, incidentally, it will only strengthen the general lawlessness of the EU. For, unlike Denmark and Britain, Sweden never negotiated an opt-out from the single currency. Legally, therefore, it is obliged to join. But that obligation has been quietly forgotten about, for reasons of political expediency. [Helmut Steuer, Handelsblatt, 20^th August 2003]

Philippe de Villiers launches anti-EU campaign

The dynamic conservative politician, Philippe de Villiers, wants to repeat in 2004 his success at the European elections in 1994 and 1999. He has decided to launch the campaign at his party’s summer university on 6^th September. He says that 2004 is a big year for Europe, what with the adoption of the European constitution, the enlargement of the EU to include ten new members, and of course the European elections. Villiers says that the elections should give voters the chance to express their views on the European construction, and in particular to express their refusal of the European construction in its present form. Villiers has said, “To adopt a constitution without a referendum would be a coup d’état” and he has said that the adoption of the European constitution would “reduce the French constitution to the level of an interior regulation in a regional council.” Villiers is to develop this idea in a forthcoming book, entitled The 51^st star in the American flag, a reference to the European Union. The French prime minister, Jean-Paul Raffarin has given several hints that there will indeed be a referendum. Villiers has also attacked the other usual things about Europe – the proposed abandonment of the Common Agricultural Policy, about which he says “only the minister is happy,” and the likely abandonment of the national veto over cultural policy. In all cases, he argues that national sovereignty is better than the straitjacket of European regulation. Villiers also intends to use the European elections to campaign against the admission of Turkey to the EU.

In the last two European elections, Villiers did well, scoring 12.33% in 1994 and 13.08% in 1999. However, on the latter occasion he ran as a double ticket with the prominent heavyweight Charles Pasqua: the alliance between Pasqua and Villiers lasted less than a year, and their party then collapsed in mutual acrimony. This setback prevented Villiers from running in the presidential election in 2002. In 1994, he had Charles de Gaulle (the general’s grandson) and Jimmy Goldsmith as running mates. This time, he probably expects to ally himself with sovereignists on the right who are unhappy in the Chirac-based Union for the Presidential Majority (UMP).

But the Villiers party is likely to campaign alongside the UMP at the regional elections next February. Villiers’ calculation is that the National Front will be present in the second round in fifteen to eighteen regions, which will cause the UMP to fear losing control of them, starting with Poitou-Charentes where the prime minister’s fief is. Villiers’ strategy, therefore, is to show the Chirac camp that he is the only national politician capable of retaining voters who are tempted by the National Front, and that the governing coalition therefore needs him. The main handicap he has is that his past successes in European elections have never translated into much in national polls. [Guillaume Tabard, Le Figaro, 14^th August 2003]

Enlargement will favour cigarette smuggling

On 8^th September, the price of cigarettes is to rise by between 20% and 25% in France. This is in keeping with a demand by the European Union that the tax on cigarettes be at least 57%. In accession countries, the taxation rate on cigarettes is only about 15% or 20%. The required harmonisation of tax levels will therefore require cigarette prices to rise well beyond the price of inflation in those countries. And this will inevitably encourage smuggling. In Poland, the price of tobacco rose by 16% between 2000 and 2002 even though the overall inflation rate was just under 5%. Immediately smuggling accounted for 20% of cigarettes, whereas previously it had been effectively non-existent. The worst example, however, is the United Kingdom, where smuggling accounts for 20% - 25% of the market. [Le Figaro, 19^th August 2003]

Germans oppose mission creep in Afghanistan

German politicians within the ruling coalition are expressing their hostility to the government’s planned extension of Germany’s “peace-keeping” operation to the Northern Afghan town of Kunduz. Politicians within the FDP-Liberals are also expressing their reserves. By contrast, Edmund Stoiber, the Bavarian prime minister and Chancellor-candidate for the Christian Democrats, is calling on the government to agree to send troops to Iraq in the event of there being a UN resolution to that effect, even though the environment minister, Jürgen Trittin, has said that Germany cannot afford it. A fact-finding team is being sent to Kunduz to see whether conditions permit a deployment of German troops there, and one SPD deputy, Klaus Barthel, has already said that the time is not ripe. A Green party deputy, Christian Ströbele, said, “The security situation in Afghanistan has deteriorated, all units of the Bundeswehr (Germany army) are increasingly being seen as a party to war. In these circumstances, I cannot support an extension of the deployment.” Another Green party deputy, Winfried Hermann, said, “I will not vote for an extension which has no perspective. It would be better to organise withdrawal.” Bild am Sonntag has also reported – albeit without quoting sources - that the German intelligence services, as well as the top brass in the German army, have advised against the deployment to the North of Afghanistan. The German government is to decide on an extension to the mandate at the latest by the end of September, and any decision must be submitted to the Bundestag (the lower house of the German parliament) for approval. The ruling coalition currently has a majority of only four; while the vote would easily be carried with opposition votes, the government would like to have its own majority on the deployment.

There is also speculation as to whether Chancellor Schröder will meet President Bush on the fringes of the autumn meeting of the United Nations in New York in September. Both the German and American governments have said that nothing has been agreed yet, which suggests that relations are still at a very low ebb indeed. [Handelsblatt, Bild am Sonntag, Welt am Sonntag, 17^th August 2003]

Czechs threaten Iraq pullout

Even before the bomb which destroyed the UN offices in Baghdad, the Defence Minister of the Czech Republic, Miroslav Kostelka, said that he would consider withdrawing the 312 troops from their role guarding a field hospital in Basra if the security situation does not improve there. Even in the more stable south of Iraq, the security situation is deteriorating; violence against coalition troops has increased with the rising heat, and as fuel and electricity remain in short supply. Czech soldiers had to disperse angry protesters on 10^th August by firing into the air, as an angry crowd gathered to block a convoy taking drinking water to the hospital. Stones were thrown at the vehicles and soldiers received minor injuries. An Iraqi man was killed when he attempted to jump onto a lorry carrying rubbish, and another crowd attacked two Czech vehicles which were returning from the British Command headquarters. On 23^rd July, a patient was injured when shots were fired at the hospital. The Defence Minister said, “If the situation were suddenly and sharply to worsen such that the field hospital would be directly threatened, it is possible that measures would be taken that would involve at least some of the personnel being withdrawn.” Although no Czech troops have been killed since the hospital was opened, the hospital commander has responded to the deteriorating security situation by temporarily forbidding Iraqis from receiving treatment in it. This has naturally only inflamed their anger even more, although Iraqis are now once again being admitted. [Kevin Livingston, The Prague Post, 14^th August 2003]

New International Court starts work