EU Leaders Fiddle while Europe Burns

By | June 17, 2005

One would have thought that the crisis in the European Union, provoked when French and Dutch voters rejected the proposed EU Constitution, might have caused a bit of soul-searching and reassessment on the part of Europe’s leaders. One would be wrong.

Since the rejection, “business as usual” has been the order of the day. French President Jacques Chirac – who’s looking more and more like a lame frog – fired his Prime Minister and replaced him with Dominique de Villepin, a Parisian aristocrat who’s never run for public office. So much for respecting the undertone of French voters, who want more, not less, representative government.

About the only ones making any progress recently are private companies and business groups, led by banks and insurers, who continue to pursue economic integration through mergers (UniCredit/HVB – IJ June 13; Aegon/Nationwide Poland – IJ June 6) and regulatory harmony (IDF/EU – IJ June 15). Unfortunately – or fortunately, depending on your point of view – European business leaders have far less clout than their American counterparts. They have to nudge, flatter and cajole politicians to do what they want. They can’t just buy a couple to pass laws favorable to business. Most businessmen have therefore kept a very discreet profile following the rejection of the EU Constitution.

The current EU summit meeting in Brussels has equally veered off any discussion of what went wrong. Its main focus is now over the 2007-13 EU budget. France is busy beating the Brits over the head about Margaret Thatcher’s famous “I want my money back” rebates; while Tony Blair and foreign minister Jack Straw are retaliating by seeking to lower farm subsidies, of which France receives the most. Not that the subsidies seem to please French farmers. Hardly a week goes by that they aren’t dumping tomatoes, strawberries and more grisly products in front of city halls in protest over low farm prices and their reduced purchasing power.

Meanwhile the Constitution remains on life support. The U.K. has already shelved a referendum on it, as have Denmark, Ireland and the Czech Republic. The EU’s current President [it rotates every 6 months], Luxembourg’s Prime Minister Jean-Claude Juncker’s call for the deadline to be extended for ratification has been approved. But it’s hard to see what this will accomplish unless the document – which consists of 448 Articles, most of them in dense legalese – is radically restructured. To take effect it must be approved by all 25 current EU members – two have already rejected it, and the Brits and Danes would probably do so as well.

If Europe’s leaders would listen more to Europe’s voters, they might actually learn something. Instead they continue to insist they know what’s best and will act accordingly. Among other concerns (unemployment, immigration, globalization, etc.) the citizens of the EU are reacting to the ever more frequent dictates coming from the un-elected European Commission in Brussels, the introduction of the euro and the expansion of the EU from 15 to 25 countries with promises of more in the future. Many of them have said “enough,” but their leaders refuse to listen.

While the Constitution would have established a more solid framework for governing the EU, it would also have ceded more power to un-elected bureaucrats. While the euro is now a successful international currency, everyone in the EU knows it’s raised prices across the board. They’re not impressed with government statistics that try to throw the blame elsewhere. Why should a croissant, which used to cost around 1.25 francs, or about 23 euro cents, now cost 80 euro cents?

The citizens of the older members of the EU, particularly in Germany, France, the Netherlands and to some extent Italy, do not see further expansion as necessarily a good thing. They see their countries as subsidizing the poorer, newer entrants, who then cut their own taxes and use the money to build more modern facilities with cheaper labor costs that take jobs away from the subsidizers. If EU leaders don’t address that concern, they will never get the voters to listen to anything else.

That fear in turn is linked to the ongoing debate – especially in France-over the “social model.” In order to attract industry, help entrepreneurs and start cutting down unemployment, Europe’s tax structure and labor market has to be made more flexible. This doesn’t mean the EU has to emulate America’s wholesale surrender to neo laissez-faire capitalism, which rewards shareholders and top executives at the expense of everybody else.

It does mean that changes are necessary, but asking the French to abandon their current network of social programs and services that they’ve won over the last 70 years is like asking the passengers in a crowded lifeboat to jump into the sea because there’s a bigger boat coming along. No one will jump until they see the other boat. Unless the voters themselves see the necessity for change and what form it will take, they won’t take a chance on losing what they have in the hope that their leaders know what they’re doing. It’s become obvious – in France at least and probably elsewhere in Europe – that the leaders don’t know what they’re doing, and that they have become too isolated for the people to trust.

Unless and until a new generation of European leaders emerges, who can rebuild that trust, and who will try to implement what the EU’s citizens want, rather than telling them what they’re going to get, there will be no progress. The EU will remain essentially gridlocked, and weaker because of it. This will initially hurt the Europeans, but it will also be a net detriment for the U.S. and the rest of world.

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