Monthly Archives: May 2008

A big and rather heavy parcel arrived in the Brussels office last week.

It contained three weighty tomes – including Norman Davies’ 1,365 page work ”Europe a History.” Also in the box were three discs, two large, glossy picture books and two brochures – all linked to the western Polish city of Wroclaw.

The package came from Poland and promotes the city, which is vying to host a new EU agency – the European Institute of Technology.

Evidently, national pride and political prestige is at stake when choosing the location of new EU bodies (countries are due to decide on the EIT this week).

If a country secures an EU agency, politicians can tell voters that they won something for them in Brussels. This is even though the EIT concept has been much watered down, under pressure from big, rich member states such as the UK, and the headquarters will employ just 60 people.

Brussels hopes that the institute will turn more high-tech discoveries into money-spinning products and help Europe close the innovation gap with rivals such as the US and Japan.

Poland is competing with Spain, Hungary and an Austrian-Slovak alliance to house the EIT. The chosen area will hope to gain fresh investment, as well as boost its high-tech industry credentials.

All the candidates have lobbied in Brussels ( you wonder how many of these Polish packages have been sent).  Barcelona’s bid gave ministers and diplomats an iPod with videos of its site.

The campaigning reminds me of a Finnish-Italian spat in late 2003 over the location of a new EU food safety agency. Here’s a teaser from the story that my colleagues wrote at the time…

Plans for the location of a dozen new European agencies have stalled, thanks to an epic tussle involving the merits of Parma ham.

Matti Vanhanen, Finnish prime minister, vowed this week to block a deal on the siting of the European Union bodies covering areas from satellites to police training – until he resolves a battle with Italy over a new food safety agency.

The dispute has become a question of national pride, with Mr Vanhanen insisting his country has the perfect facilities for the food agency.

But Silvio Berlusconi, Italian prime minister, has blocked the transfer of EU staff to Helsinki for almsot two years,  claiming the agency should be based in Parma.

“The Finns don’t even know what prosciutto is, “Mr Berlusconi famously stormed at a summit in 2001.

Read more here.

Italy won the agency, by the way…

Read a European Commission document closely enough, and there’s usually a nugget in it somewhere. In the case of Tuesday’s communication on rising global food prices, it was to be found in the final paragraph, which asked the question: Should the EU drop its biofuels target due to rising food prices?

European Union leaders committed themselves last year to producing 10 per cent of their road transport fuel by 2020 from biofuels. Among scientists, car manufacturers and green campaigners, not to mention several EU governments, it was always a contentious target. But the Commission reaffirmed the goal in January, describing biofuels as one of the few measures “realistically capable of making a significant impact on greenhouse gas emissions from transport”.

The tone of Tuesday’s message from the Commission was subtly different. It stated: “The target has never been to reach 10 per cent biofuels at any price. It is 10 per cent biofuels under strict conditions. Those conditions include a workable and robust sustainability scheme, and commercial viability for second generation biofuels…”

In a word, the Commission is putting more emphasis now on the question of “sustainability” – that is, whether biofuels can be produced in a way that does not degrade the environment - and less on the 10 per cent target itself.

To some extent, the switch of emphasis reflects the pressure that the EU feels under from those who argue volubly that biofuels production is driving up world food prices and damaging the environment at the same time. But some EU governments would no doubt heave a private sigh of relief if the 10 per cent biofuels target were to be put to one side. 

Significantly, the target is also coming under criticism from influential political circles in the European Parliament, which would have to approve the 10 per cent goal for it to become law.

All of which raises the question of whether the first big hole is being blown in the EU’s campaign against climate change. Adjusting the biofuels target should, of course, be a matter of simple common sense. It ought not to involve a massive loss of face.

But climate change is a war in which the EU likes to lead the world from the front – partly because it is neither willing nor able to handle real wars. Any climbdown from the biofuels target is bound to be seen as an embarrassment for the EU. That’s a pity, but if truth be told the risk of red faces has been growing for more than a year.

For weeks it has been an uncomfortable secret in Brussels that the European Union’s law and order mission in Kosovo is stuck in a political, diplomatic and legal morass. This initiative, announced with great fanfare last December, was supposed to show the EU at its best, shouldering responsibilities in a conflict-torn part of Europe where it did not exactly cover itself with glory in the 1990s.

Instead, officials now acknowledge that there is absolutely no chance that the EU will deploy its full complement of 1,900 policemen, judges, prosecutors and other administrators by mid-June, as originally planned. Why not? Because the authority to transfer police powers from the United Nations operation that is already in place in Kosovo to the new EU mission rests with the UN Security Council, where Russia has a veto.

Russia is no mood to help out the EU because it fundamentally disagrees with the decision of a majority of the EU’s 27 states to recognise Kosovo’s secession from Serbia in February. And the Kremlin has made it very plain to UN Secretary-General Ban Ki-moon that it expects him not to do the EU any favours on this score.

It looks highly unlikely there will be a quick solution to this problem. As a result, a de facto partition is taking hold between ethnic Serb-dominated northern Kosovo and the rest of the province, where ethnic Albanians are in an overwhelming majority. The EU’s nascent law and order mission has practically no influence over northern Kosovo, and there is little reason to think Serbia or Russia will let it develop any.

Perhaps the only glimmer of hope in all this was the May 11 Serbian election victory of the pro-EU political forces associated with President Boris Tadic. At present, however, it is unclear if Serbia’s next government will be formed by these forces or by a militant nationalist-socialist coalition. In any case, even Serbia’s pro-EU forces refuse to accept Kosovo’s secession. You can safely add Kosovo to your list of long-term troublespots on the EU’s periphery. 

The European Union’s leaders travel next month to Khanty-Mansiysk for a summit with Dmitry Medvedev, the new Russian president. Will they find time, I wonder, in this booming western Siberian oil town to stop off at the crossroads of Sverdlova and Pionerskaya streets? They should do. There, in front of School No. 5, they will find a recently erected memorial to the victims of Stalin’s repressions - at least, so the town’s government website says.

The existence of this memorial reminds us to think twice before rushing to judge today’s Russia. The country clearly moved to a more authoritarian, centralised form of rule under Vladimir Putin, and civil liberties were curtailed. But many Russians remain as determined as ever to expose the truth about their country’s bloodstained communist past. These days, Stalin cannot be airbrushed from Russia’s history as easily as he used to airbrush his opponents.

Putin’s reordering of Russia and his revival of its great power foreign policy ambitions contributed to a downturn in EU-Russian relations, but none of that makes Russia a monotonal society. As EU enlargement commissioner Olli Rehn said in a thoughtful speech last week: “The rise of the middle class and entrepreneurs in Russia should eventually mean growing demands for property rights and, by extension, legal certainty. This internal dynamic may lead Russia to reform its legal system and make its political system more accountable – but this is certainly not an automatic process by any means.”

Russia’s leaders at present can hardly be said to share the EU’s core values of freedom, democracy and the rule of law. But neither do other countries important to Europe, including, for example, most of its neighbours on the southern shores of the Mediterranean. As with these neighbours, so with Russia – there’s little choice but to try to improve relations. 

It would be wrong to kick Russia out of the G8, as John McCain suggested in March – even if that were possible. Rather, the EU and the US should be hard-headed but practical in its dealings with Russia and, above all, recognise that relations with Moscow tend to be at their most difficult when western countries themselves are disunited.

“Experience shows that Russia respects the EU when we are able to adopt united positions, and act accordingly. Conversely, Russia is adept at exploiting disunity among member-states,” David Milliband and Bernard Kouchner, the UK foreign secretary and French foreign minister, wrote in a joint letter in March to the EU’s Slovenian presidency.

All too true. But the Khanty-Mansiysk summit will show whether these wise words were just that - words.

The European Commission takes a lot of flak for being full of highly paid, unaccountable elitists brimming with a Euro-zeal that finds no match in the European population at large. So it is a pleasure to say that the Commission’s report on 10 years of European monetary union is a model of incisive analysis and sensible recommendations.

For sure, as Jean Pisani-Ferry and André Sapir wrote in the FT, the report has its fair share of “hype”, trumpeting the euro as a “resounding success”, etc, etc. But why not? Part of the Commission’s role is to be a cheerleader.

Sometimes this relentlessly upbeat tone leads to unfortunate results. The Commission’s regular economic forecasts, for example, are invariably too optimistic and produced a bit later than those of other reputable forecasters. In 10 years of following the eurozone economy, I have yet to meet one private sector economist who awaits the Commission’s predictions with bated breath.

But the report on monetary union is a different matter. It is pretty blunt about the problem of divergence – in terms of productivity and competitiveness – between the best-performing and worst-performing eurozone economies. It recognises that some countries have had a free ride inside the eurozone, avoiding painful reforms because they have the shelter of a fixed exchange rate and common monetary policy.

It doesn’t name these countries, of course – the Commission is too polite for that. But we all know who they’re talking about – Greece and Italy, principally, with a dash of Portugal, Slovenia and Spain thrown in.

It is not the Commission’s role to speculate in public about whether the reluctance of the eurozone’s laggards to reform themselves will one day lead to the disintegration of the euro area as we know it. But one friend of mine at the Commission told me the other day that the laggards “have about 10 to 15 years” before the price for their lack of reforms becomes too expensive to pay.

In other words, one or two countries might just drop out of the eurozone.

I’m not so sure about that. It strikes me that the political commitment of the eurozone countries to stick together is extremely strong. Would Germany and the Netherlands really throw Italy and Greece to the wolves (the cost of abandoning the eurozone would be astronomically high)?

Yes, you do hear a few Germans and Dutch fume privately about Mediterranean economic incompetence, recklessness and corruption. But in the end the northerners are pussycats.

More likely, a deal will be struck under which the strong and less strong find some middle position that will keep the eurozone intact but make it less internationally competitive. That should please the rest of the world, if no one else.

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Peter Spiegel is the FT's Brussels bureau chief. He returned to the FT in August 2010 after spending five years covering foreign policy and national security issues from Washington for the Wall Street Journal and the Los Angeles Times, focusing on the wars in Iraq and Afghanistan. He first joined the FT in 1999 covering business regulation and corporate crime in its Washington bureau, before spending four years covering military affairs and the defence industry in London and Washington.

Joshua Chaffin is one of the FT's EU correspondents, covering areas including policies on trade, the environment and energy. He has worked in the FT's Brussels bureau since late 2008 and before that was an FT correspondent in New York and Washington DC.

Alex Barker is EU correspondent, covering the single market, financial regulation and competition. He was formerly an FT political correspondent in the UK and joined the FT in 2005.

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