European Foundation Intelligence Digest, 18th

Berlin and Paris bury Stability Pact

The French and German leaders have united around support for a “flexible” interpretation of the Stability and Growth Pact - in other words that they intend to ignore its provisions. Moreover, they have obtained the green light to do this from the monetary commissar, Pedro Solbes, who gave the countries a further year to bring their finances under control. Solbes is himself under pressure at the moment because Eurostat comes under his remit, and he stands accused of tolerating corruption in his department. This means that the Pact will not be respected this year, as it has not been for the last three years running. This breach of the rules has been sugared over with promises by the errant pupils to do better in future. But it underlines that there is no point having the rules in the first place, since it is now admitted that they are incompatible with the primary obligation of any government to be able to adjust economic policies to circumstances. [Martin Wiegers, Die Welt, 14^th October 2003; Solbes interview in Le Monde, 12^th October 2003]

The French President and the German Chancellor, together with their foreign ministers, held a meeting in the Elysée Palace on 12^th October in order to harmonise their positions before the European council on 16^th and 17^th October. Jacques Chirac said after the working dinner that both countries were determined to reduce their budget deficits but that they would not put economic growth at risk to do so. The German Chancellor agreed, saying that he thought that the other EU member states and the European Commission had an interest in seeing the French and German economies grow. Mr. Schröder also said that the latest discussions between Paris, Berlin and Brussels had led to the Commission adopting a more realistic position on the matter of the French and German budget deficits, which are expected to be 4% and 3.8% of GDP in 2003.

The two sides also discussed the European Constitution and the Common Defence Policy. According to reports in the German press, Berlin and Paris are working with London on a project to create an EU military force which would be independent of NATO. [Le Monde, Handelsblatt, 13^th October 2003]

French and German friendship has reached such a pitch, indeed, that the German Chancellor has asked the French President to represent him at the EU summit on Friday. German officials will be waiting outside the door just in case there are any difficult decisions which would need a phone call to the Chancellor to resolve. The reason for this strange arrangement is that both the Chancellor and the Foreign Minister, Joschka Fischer, need to leave Brussels late on Thursday evening in order to vote in the Bundestag. We have come a long way from the Nice summit three years ago when, during an argument between France and Germany over the votes each country should have, Chirac asked out loud what French soldiers had shed their blood in two world wars for. [Ralf Beste, Der Spiegel, 14^th October 2003]

Demands that German finance minister resign

Total German borrowing this year will reach a historic record of €87 billion, as opposed to the €70 billion predicted by the Government. Federal Government borrowing alone will be €42 billion, as opposed to the €18.9 billion which had been planned. Faced with this evident loss of control of state finances, the opposition has called for the resignation of the federal finance minister, Hans Eichel, who had taken office promising to put Germany’s finances in order. The previous record for federal borrowing in one year was €40 billion under Theo Waigel and Helmut Kohl in 1996. Eichel said that that record was being broken because low economic growth was reducing government revenue and increasing expenditure on things like unemployment. The government says that this means a deficit of 3.8% of GDP; experts say it could be nearer 4%. The budget expert of the CDU opposition said it could end up being 4.7%. The budget commissar in Brussels, Pedro Solbes, said that he expected it to be at least 4%. Critics say that Eichel’s figures even now use estimates about future government revenue which cannot be relied upon. [Die Welt, 13^th October 2003]

Newspaper editorials agree that these record borrowing figures are very bad for the coalition government, whose majority in parliament is very small (4 votes). The failure to cut spending reflects the government’s overall failure to reform anything fundamental in Germany, it is argued. In the absence of any big changes, the Finance Minister was forced to introduce tax increases which he himself originally opposed and, in other cases, to reduce tax breaks he had previously raised. He said in the summer of 2002 that the budget would be brought under control, and this helped the re-election of the government. But it meant that Eichel was forced to explain himself to a parliamentary committee of enquiry earlier this year. Editorialists say that if Eichel is forced to resign, it could bring down the government itself.[Süddeutsche Zeitung, 13^th October 2003]

Dissatisfaction grows with constitution

The prominent Social Democrat MEP, Klaus Hänsch, has said that he found the opening discussions of the Intergovernmental Conference to be “completely eerie”. Hänsch had been a member of the Convention; now he is one of the European Parliament’s two representatives at the IGC. Hänsch said that the opening discussions have little ground for optimism because old arguments were being re-hashed, even though they had already been dealt with in the Convention. The biggest sticking point is the size of the Commission, many countries refusing to be deprived of at least one commissar. Hänsch says that he fears that everything will be thrown open for discussion in the IGC, and that the governments will unite around the lowest common denominator at the last minute of the negotiations. Asked about his “baby”, the draft text, Hänsch replies that he is concerned about it. “Too many people are trying to prevent the child from growing up. They want to dress it in their own imaginations. Such creatures are never good because they never get to be themselves.” [Interview in Die Welt, with Katja Riddersbusch, 15^th October 2003]

Reduction in commission ‘will not happen’

According to the Austrian foreign minister, Benita Ferrero-Waldner, the number of states opposed to the reduction in the number of commissars to 15 is too great for this key proposal of the draft Constitution to be adopted. 18 out of 25 countries are demanding that each country have at least one commissar. Supporters of the change point out that the principle has already been accepted at Nice, where it was agreed to have 20 commissars for 27 countries. They say that if the principle agreed at Nice is now dropped, then those countries which then agreed to drop their 2 commissars (Germany, France, Britain and Italy) will demand something in return. The German foreign minister, Joschka Fischer, has said that it does not want to change the draft. Fischer said that the number of commissars was one of the most difficult questions, which would not be solved until the end of the IGC, which is expected to be in December. Poland and Spain remain determined to keep the voting rights agreed at Nice. German sources say that the German Chancellor has privately been very critical of Warsaw’s intransigent attitude: it is said that large financial subsidies were agreed for Poland, and that Poland is now expected to react favourably to the new constitutional proposals – in other words, that she is expected to sell her birthright. “The way the Poles are behaving is not the way we work here,” said a senior EU diplomat. [Handelsblatt, 15^th October 2003] One of the reasons why the draft proposes to reduce the number of commissars is that there is not enough work to go round for 25 of them. [Jean Quatremer, Libération, 15^th October 2003]

Euro-Parliament unhappy with Poland and Spain

Members of the European Parliament have expressed anger that Poland and Spain want significant changes to the draft constitution, especially where voting rights are concerned, whereas both countries had representatives in the European Convention which drew up the draft. Martin Schulz, the head of the Social Democrat group in the European Parliament, said that if the result of the negotiations in the Intergovernmental Conference was that the Nice Treaty was kept intact and just re-labelled, then the European Parliament should have the courage to reject it. Although there is no legal requirement for the EP to approve the new Constitution, which is just a new treaty between the signatory states, the parliaments of Belgium and Italy have said that they will base their own decisions on that of the European Parliament. If either of them rejected it, the Constitution would not be ratified. [Katja Riddersbusch, Die Welt, 10^th October 2003]

Raffarin wants referendum

The French Prime Minister, Jean-Pierre Raffarin, has said that he wants France to ratify the new European constitution by referendum. Although Raffarin agreed that the constitution was “so important” that it needed to be submitted to the people, he also conceded that a referendum was “an enormous political risk”. Chirac’s own position on the referendum is less unambiguous than that of his Prime Minister, although he has also in the past said that a referendum was desirable. [Le Figaro, 13^th October 2003]

Giscard defends draft

The president of the European Convention, Valéry Giscard d’Estaing, has annoyed the Spanish by saying that the voting arrangements agreed at Nice have to be corrected, as his draft Constitution suggests. According to Nice, Spain has 27 votes in the Council of Ministers while Britain, France, Germany and Italy have 29, i.e. only 2 more even though they are much bigger countries. Giscard even suggested that the Spanish Government was not as opposed to the new voting arrangements as the Prime Minister, José-Maria Aznar. This suggestion elicited a swift response from Aznar and his foreign minister, Ana Maria Palacio, who accused Giscard (and by extension the French Government, which supports the draft) of nostalgia for the old days when the affairs of the EU were stitched up by the six founder member states. She added, “We have said that the proposed Constitution is unacceptable. Now we hope that those who wish to change the Treaty of Nice will come up with other proposals which are acceptable for Spain.” Aznar’s designated successor, Marianin Rajoy, the leader of the Partido Popular, agreed, saying that, “We want to remain with the Nice arrangements. That is in the interests of Spain and we intend to defend our interests.” Giscard also irritated the Spanish by saying that Spain’s main ally on this issue, Poland, had no right to talk about Nice because it had not signed the Nice treaty (not being a member state of the EU). These harsh words have confirmed the view that the big states will “punish” Spain if it refuses to agree to the new Constitution, by cutting subsidies. [Leo Wieland, Frankfurter Allgemeine Zeitung, 8^th October 2003]

Lobbying for God

At the first session of the intergovernmental conference which started in Rome on 4^th October, some 15 states expressed a desire to see the insertion of a reference to the “Christian heritage” of Europe inserted into the new European Constitution. Now a group of MEPs has launched a campaign for this. Led by Elizabeth Montfort, the MEPs are calling for the reference to the religious heritage of Europe to include the phrase “especially Christian”. This request was rejected by the European Parliament on 24^th September, by 283 votes to 211 and 15 abstentions. But the pro-Christian MEPs are now launching a public petition, which has already collected some 300,000 signatures. Madame Montfort is hoping to get a million names by the end of the year. Two French organisations, the Convention of Christians for Europe and the Foundation for political service, are campaigning for the insertion of the reference, saying that Christianity is both a simple historical fact about Europe, and that it is the source of human rights and indeed of the idea of European unity. [Thomas Ferenczi, Le M onde, 12^th October 2003]

Putin attacks European ‘bureaucrats’

Speaking at the Russian-German summit in Yekaterinburg, the Russian president accused “bureaucrats in the European Union who would like to put down conditions for Russian entry to the WTO which are deliberately unacceptable.” Putin described the EU’s position as “dishonest” and said that Russia was not prepared to allow itself to have its hands tied. Russia is the largest economy still outside the WTO and the deadline for its acceptance keeps slipping. The original aim was 2003 but now people are expecting it to take until 2008, as negotiations have reached an impasse. The main stumbling block is internal energy prices. The EU wants them to be aligned with international process, arguing that the present arrangements represent a huge subsidy to Russian industry. Currently, prices for energy are about one sixth inside Russia of what they are on the European market. Russia argues that these arrangements should be allowed to continue, given that they reflect geographical fact and that the Russian winter is so cold. Russia is also under pressure to liberalise the energy sector, in particular by dismantling the state energy monopoly, Gazprom. But it seems unlikely to do this, as Gazprom provides much of the state budget and also supports President Putin. Arguments have now broken out within the Russian elite about the degree to which the country should integrate economically with Western economic structures like the WTO: it is argued by the pro-integration camp that foreign investment is necessary and that only full WTO membership will produce it. [Natalie Nougayrède, Le Monde, 12^th October 2003]

Russia thinking of pricing petrol in euros

President Putin has said that he does not rule out the possibility of denominating Russian oil sales in euros. He was speaking at the same Russian-German press conference on 9^th October. Almost half of Russia’s oil exports go to Europe. Putin originally suggested selling oil for euros in 1999, when relations with the US were also tense. [Le Monde, 12^th October 2003]

German-Russian economic cooperation

At their summit meeting in Yekaterinburg, the German and Russian governments signed an agreement which allows Germany to transport military equipment to Afghanistan via train through Russia. This is the first agreement of its kind between Russia and a member state of Nato. The Germans are also paying for the Russians to decommission some nuclear submarines. But the main discussions were about economic co-operation. Business agreements were signed worth some €1 billion, and the German Chancellor was accompanied by a delegation composed of 15 business managers. On the other hand, an agreement about the construction of the gas pipeline though the Baltic Sea was put off. This project will cost some €5 billion. Putin announced an energy summit between Russia and Germany for next year. [Die Welt, 9^th October 2003]

Prosecutor call for prison for Juppé

Alain Juppé, the Mayor of Bordeaux, former Prime Minister, and close associate of Jacques Chirac, who stands accused of having presided over the illegal financing of the RPR Gaullist party led by Chirac, is now in danger of seeing his career ruined by the criminal prosecution which has been brought against him. The prosecutor has called for Juppé to be imprisoned for eight months: he would thus be prevented from standing for election in the next five years, which would mean that he could not replace Jacques Chirac as president of the Republic in 2007. Juppé has for long been Chirac’s preferred successor. Juppé is accused of using money from the City of Paris, where Chirac was Mayor, to pay for party staff. He is also accused of awarding public contracts on the understanding that the contractors would make donations to party funds. Juppé denies knowing anything about the illegal finance activities which went on while he was General Secretary of the RPR, but several company representatives have given evidence about how the system worked, and Juppé’s own former chef de cabinet confirmed their testimony. Juppé claims to have stopped the bad practices as soon as he found about them, but his own party secretary was herself paid by the City of Paris and by two companies. The trial has, in addition, implicated President Chirac, for two businessmen said that the RPR party had pressured them to pay the salaries of two of Chirac’s own closest collaborators. But Chirac cannot be prosecuted for this, since he is the President of the Republic. [Christoph Nesshöver, Handelsblatt, 13^th October 2003]

Fini suggests votes for immigrants

The deputy Prime Minister of Italy, Gianfranco Fini, has surprised many by saying that foreigners living in Italy should be given the right to vote when they get their work permits. According to the Italian news agency, Ansa, this suggestion has caused an “earthquake”. Reaction against the proposal has been particularly strong in the Northern League, which governs Italy in coalition with Fini’a National Alliance and Berlusconi’s Forza Italia party. The leader of the Northern League suggested earlier this year that the Italian navy should sink boats carrying illegal immigrants: his party is known for its stiff anti-immigration rules. Fini, who used to be a fascist, passed an immigration law last year which bears his name: now he seems to want to associate himself with the full integration of immigrants as Italian citizens. He said that his proposal would allow immigrants to “live in dignity”. Fini is no doubt attempting to get the immigrants in question to vote for him; but he is also presumably seeking a way out of Italy’s demographic collapse by encouraging immigration. [Paul Badde, Die Welt, 9^th October 2003]

Fini’s unexpected suggestion has prompted a Vice-President of the Northern League to say that its leader, Umberto Bossi, might resign from the Government and break up the governing coalition if such a law is adopted. Roberto Calderoli said that he did not see how Bossi could go before Parliament and ask for it to vote for such a proposal. This would represent an end to the Casa delle Libertà which has governed Italy since Berlusconi’s election in 2001. [La Repubblica, 15^th October 2003]

Royal row in Netherlands

The second in line to the Dutch throne, Prince Johan Friso of Orange-Nassau, has renounced his succession in order to be able to marry the woman he loves. The Dutch Prime Minister has announced that the prince will not seek parliamentary approval for his marriage to Mabel Wisse Smit, an alliance to which the Prime Minister is himself firmly opposed. The reason for the controversy is that Ms. Smit has been revealed to be a friend of a drug baron, Klaas Bruinsma, who was assassinated in 1991. She was also a friend of Mohammes Sacirbey, a former ambassador of Bosnia-Herzegovina, who is suspected of having stolen some $2.5 million from international funds. Worse, the young couple had effectively lied about the relations between Ms. Smit and Mr. Bruinsma. But an investigative journalist has revealed that she in fact spent several nights on Mr. Briunsma’s yacht: the suggestion is that what Ms. Smit has tried to pass off as a casual acquaintance was, in fact, an affair. Ms Smit has received the public support of Bernard Kouchner, the former French minister and humanitarian campaigner, and George Soros, for whom she works as head of the Open Society Institute in Brussels. [http://www.soros.org/osi/brussels.html] But this does not seem to have made much difference. As for the prince, he is in search of a job having given up his job in banking last June. [Jean-Pierre Stroobants, Le Monde, 14^th October 2003]