Buried in this month’s “Annual Report on the Euro Area 2009″ from the European Commission is some absorbing material on competitiveness in the eurozone.  Some countries, above all Germany, Europe’s export champion, have consistently outshone others in terms of business competitiveness since the euro’s launch in 1999.  The result has been the accumulation of large current account deficits in countries such as Cyprus, Greece, Portugal and Spain - but also in Ireland, Malta, Slovakia and Slovenia.

As the Commission says, in impeccably understated language: “The build-up of large external liabilities has increased exposure to financial shocks…  In the current downturn, financial markets have become more responsive to the net external financial asset position for the euro area countries.  Even if to a large extent the net external position is related to the private sector, the public sector can be affected by private sector debt in the form of potential bail-outs and other fiscal implications.”

Put simply, the Commission is warning that the gap between Germany and other strong performers - such as Austria, Finland and the Netherlands - and the group of laggards poses a bigger risk to the eurozone’s stability than it did before the financial crisis.  If you are one of the laggards in competitiveness and your financial sector is in trouble, then the financial markets will start taking a close look at how sustainable your public finances are.  And because you share a common currency with 15 other countries, your problem is unavoidably their problem, too.

There is some evidence that the laggards are cutting their current account deficits.  Spain’s, for example, is projected to fall to 5 per cent of gross domestic product next year from 9 per cent this year.  But in general the countries that need to improve competitiveness most urgently are also those with the worst rigidities in labour and product markets.  As a result, unit labour costs in the laggard countries have risen by 2.5 per cent or more every year since 1999, whereas Germany’s unit labour costs have stayed more or less unchanged.

This problem clearly needs addressing before the strains on European monetary union (EMU) become intolerable.  What is to be done?  The Commission’s report is masterfully vague, saying: “Competitiveness developments warrant broader surveillance…  Effective functioning of EMU calls for an early detection of these external imbalances in order to prompt an adequate and timely policy response.”

Germany’s response, I reckon, would be more blunt.  The Germans would tell the laggards: “Put your houses in order, like we did after being hit with the gigantic cost of our country’s reunification in 1990.  Regain competitiveness.  If it means your citizens have to put up with stagnant living standards for a number of years, so be it.  Eurozone membership is not a free ride.”

The only thing is, I’m not sure this is what the laggards want to hear.

As the fuss continues about whether or not Vaclav Klaus, the Czech president, will sign the European Union’s Lisbon treaty, I’d like to draw everyone’s attention to a detail that appears to have been generally overlooked.  It concerns Klaus’s demand for a special protocol or legally binding exemption from the treaty’s Charter of Fundamental Rights, which, he says, is necessary to prevent a flood of claims on Czech property from the descendants of the roughly 3m Sudeten Germans expelled from the former Czechoslovakia after the second world war.

Leaving aside Klaus’s dubious assertion that the Charter could be exploited as the basis for such claims, the fact is that the Lisbon treaty already contains a special declaration by the Czech Republic on the Charter.  It is buried near the end of the treaty’s official text in a part called Final Act of the Intergovernmental Conference, Section C: Declarations by Member-States.  The Czech declaration, which is labelled No. 53, sets out the Czech position that “the Charter does not extend the field of application of [European] Union law] and does not establish any new power for the Union”.

It also underlines that “insofar as the Charter recognises fundamental rights and principles as they result from constitutional traditions common to the member-states, those rights and principles are to be interpreted in harmony with those traditions”.

In short, the Lisbon treaty already ring-fences Czech sovereignty insofar as it relates to the application of the Charter of Fundamental Rights.

Moreover, as Alexander Vondra, the former Czech EU affairs minister, has pointed out, other EU governments have already agreed with the Czechs that new EU laws cannot be applied retrospectively to back up property claims.

All of which Klaus undoubtedly knows.  What is my conclusion?  That Klaus’s alarmism about Czech vulnerability to German property claims is a legalistic ruse, a political manoeuvre, and not a serious legal point at all.

What is his real aim?  Ideally, he would like to torpedo the Lisbon treaty.  But he knows this will be all but impossible, if the Czech constitutional court gives a positive ruling on the treaty in the next couple of weeks.  So his fallback position is to extract a declaration from other EU leaders giving a superfluous guarantee for the Czech Republic.

Then he can hold aloft this declaration in front of his countrymen, and - hey presto! - to borrow a phrase, it will be “peace in our time”.

Even before he was elected as president of France in 2007, Nicolas Sarkozy made it crystal-clear that he didn’t want Turkey to join the European Union - ever.  Now concerns are growing in Brussels that Sarkozy is contemplating a formal Franco-German initiative next year to offer Turkey a “privileged partnership” instead of, as now, the long-term prospect of full EU membership.

The idea of a “privileged partnership” has been around for a good few years.  Sarkozy likes it, and so does Germany’s ruling Christian Democratic party.  It also appeals to Angela Merkel, the CDU chancellor.  However, Merkel has up to now taken a nuanced approach, recognising that Germany, along with other EU countries, recognised Turkey as an official candidate for membership in 1999.  A responsible country cannot just wriggle out of agreements made in good faith, Merkel believes. 

The difference now is that, after last month’s German election, the Social Democrats - more sympathetic to Turkey’s aspirations - are out of government and have been replaced by the Free Democrats, whose position on Turkey is more ambiguous.  The balance of opinion in Berlin is changing.  Sarkozy may try to seize the opportunity to line up the new German government behind the concept of the ”privileged partnership”, according to EU policymakers.

Needless to say, Turkey would dismiss an offer along these lines as an insult.  There is no legal foundation for a “privileged partnership”, says Egemen Bagis, Turkey’s chief negotiator on EU matters.   You are either in the EU or not in the EU.  You cannot be half-pregnant, Bagis once told me.

The US would undoubtedly dislike such an initiative, too.  Ignoring criticism that it’s none of their business, both Democratic and Republican administrations have always encouraged the EU to accept Turkey as a full member.

Alas, Turkey’s EU membership bid is in serious trouble, anyway.  The European Commission tried to put a brave face on matters this week in its annual report on Turkey.  But the inescapable truth is that out of the 35 negotiation chapters, or policy areas, that a country needs to complete in order to join the EU, Turkey has opened 11, of which only one has been provisionally closed.  Another 12 chapters have been either formally frozen by the EU, or informally blocked by France with support from others opposed to Turkey’s bid.  The entire process risks grinding to a halt.

In December EU leaders will discuss Turkey’s failure to heed their calls to open its ports and airports to ships and aircraft from the Greek Cypriot-controlled government of Cyprus.  In theory they could take a harsh line and more or less abandon Turkey’s EU entry talks.

I doubt this will happen - Sweden, which holds the EU’s rotating presidency until December 31, is friendly towards Turkey, and many other countries think it would be crazy to adopt such a position just when negotiations on a Cyprus settlement are reaching a critical moment.

But towards the end of the first half of 2010, the picture may well look different.  April is the key month.  If the Cyprus talks are deadlocked by the time of next April’s Turkish Cypriot presidential election, and if he can get Germany on board, Sarkozy may be tempted to unveil his “privileged partnership” proposal.

Ask a minister in a European Union government what post their country hopes to get in the next European Commission, and the response is the same every time - something important to do with the economy.  Well, you can’t blame people for not hurrying to step into the shoes of Leonard Orban, the Romanian commissioner for multilingualism.

On the other hand, there aren’t enough top economic jobs for Commission president José Manuel Barroso to satisfy everyone.  Truth to tell, the Commission looks too big with 27 members.  But that’s the way it is, and that’s the way it will stay under the EU’s Lisbon treaty.  A guaranteed seat on the Commission seems a simple, visible way of making a country’s citizens feel connected to the EU.

The main four economic portfolios in Barroso’s outgoing Commission have been - in no particular order - competition, the internal market, trade, and economic and monetary affairs.  These have been occupied by the Netherlands, Ireland, Britain and Spain respectively.  By contrast, France has held two lesser posts (first transport, then justice, freedom and security), and Germany has dropped almost completely out of sight in the post of enterprise and industry.

As Barroso puts together his new team, France and Germany are in the hunt for really big jobs and feel no doubt that they deserve them because of their relatively diminished status in the outgoing Commission.  The French and Germans want to play a much more direct role in shaping the EU’s economic and financial policies as the EU struggles to emerge from recession, rewrites its rules on financial regulation and defends its industries in world markets.  France is said to desire the internal market job on the Commission, and Germany would like something equally prominent.

All this is causing some nervousness in Britain and a few like-minded countries that the next Commission will be less free market-oriented than its predecessor.  In response I would make two points.  First, this is the spirit of the age - you can expect nothing less after the recent near-meltdown of the western world’s financial system and the associated regulatory failures.

But secondly, it just does not follow that to give a top economic dossier to France or Germany means that the Commission will be wrenched in the direction of some manically illiberal étatisme and fiendishly pro-Volkswagen industrial policy.  To take one excellent example, Pascal Lamy, the Frenchman who served as trade commissioner from 1999 to 2004, was a robust defender of free trade and now is head of the World Trade Organisation.  The same would be true if the next French commissioner were someone like Christine Lagarde, who at present is President Nicolas Sarkozy’s finance minister (she is still a possible choice, some think, even though it looks as if Sarkozy is going for Michel Barnier).

EU commissioners, at their best, are like US Supreme Court justices.  When a president picks a judge to sit on America’s highest court, everyone’s first thought is, “Here we go, a blatant political appointment designed to push the Court in a certain ideological direction”.  Then, more often than not, the nominee causes a surprise by putting the court’s interests first and acting independently.  So it can be at the Commission, where the institutional culture of independence from political pressure is stronger than many on the outside assume.

It was inevitable, I think, that Czech President Vaclav Klaus would take his last stand against the European Union’s Lisbon treaty on the Sudeten German issue.  This has been one of the most highly charged themes of Czech politics since the former Czechoslovakia threw off communism in 1989.  By raising it, Klaus aims to break out of the extreme political isolation into which his hostility to Lisbon has pushed him on both the Czech and the wider European stage.  But it is a step that smacks of desperation as much as of calculation.

The Sudeten German question touches a genuinely raw nerve among some Czechs.  It relates to the several million ethnic Germans expelled from Czechoslovakia at the end of the second world war at the behest of the Prague authorities, who were convinced - with good reason - that large numbers of the German minority had served as a Nazi fifth column.  Some Czech politicians have proved willing to play on the fears of ordinary Czechs that descendants of the Sudeten Germans may one day succeed, through legal action, in reclaiming the property of which their forebears were stripped. 

Klaus says he wants a clause attached to the Lisbon treaty guaranteeing that the European Court of Justice will never invalidate the so-called Benes decrees, the act under which the Sudeten Germans - as well as a smaller number of ethnic Hungarians - were expelled from their homes.  “The last Czech government did not pay enough attention to this question, so vitally important for the Czech Republic,” he said last Friday.

It is undeniable that property issues remain sensitive in the EU.  Denmark, with one eye on its German neighbours to the south, restricts foreign ownership of holiday homes.  Poland, like the Czech Republic, frets about potential property claims from ethnic Germans expelled from territories that Poland was awarded in 1945, in compensation for land lost to the Soviet Union.

But the sensitivities are most acute in the Czech Republic, perhaps because it is a smaller country than Poland.  The claims for restitution are loudest in parts of Germany and Austria close to the Czech borders.  In both countries, important political parties are sympathetic to the expellees’ campaigns - Bavaria’s Christian Social Union and the Austrian Freedom Party.  The Austrian party’s late leader, Jörg Haider, used to provoke the Czechs by likening the treatment of the Sudeten Germans to the Nazi extermination of Europe’s Jews.

Some Czechs may feel Klaus is justified in demanding his guarantee.  But others will see it as a last throw of the dice to disrupt ratification of Lisbon.  After all, every single government and parliament in the 27-nation EU has now approved the charter.  There must be at least a sneaking suspicion that, if upholding the legality of the Benes decrees at European level is a matter of such existential importance to his nation, Klaus left it remarkably late in the day to bring it up.

Every now and then, I’m asked in Brussels whether the opposition British Conservative party’s hostility to the European Union is related to the fact that so many of its top people - including David Cameron, likely to be the UK’s next prime minister - went to Eton.  The theory is that they’re so snooty and cut off from the lives of ordinary Britons that they’ve lost all sense of what’s in the national interest.

Well, it’s always tempting to have a rant about privilege.  But in this case, the verdict on Eton is “not proven”.

Eton is perhaps the world’s most famous elite private school, founded in 1440 under King Henry VI.  Located near the town of Slough, it is sometimes mocked as ”Slough Comp” (in other words, Slough Comprehensive, like your average school in Britain’s struggling state-run education system).

Eton is notorious for a variety of savage and peculiar customs, such as the brutal bullying of children (now stopped) and something called the Wall Game, in which a goal has not been scored since 1909 (still going strong).

Eton has produced 18 British prime ministers, some brilliant (Sir Robert Walpole, William Gladstone, Lord Salisbury), some average (George Canning, the Duke of Wellington) and some mediocre (Sir Anthony Eden, Sir Alec Douglas-Home).  Abhisit Vejjajiva, Thailand’s prime minister, was educated at Eton.

So why do I consider the case against Eton “not proven”?  In the first place, history shows that not every British statesman who went to Eton was anti-European - or even liked the school.  Take Lord Salisbury, who was prime minister for 13 years between 1885 and 1902.  Born Robert Cecil, Salisbury was an astute manager of Britain’s relationship with the European powers.  And he absolutely loathed Eton, especially, as his biographer Andrew Roberts writes, “after Troughton major with ten pints of beer inside him had burnt Cecil’s mouth with a candle so badly that he could not speak for the rest of the evening”.

In the second place, hostility to the EU is, quite simply, found at all levels of the British social ladder.  I once lived in Kent on a street where most people had never been to a university, let alone a school like Eton.  They were as rabid a bunch of anti-Europeans as any British people I’ve ever known.  What’s more, they all voted Tory - and I am quite sure they will all vote Tory in next year’s UK election.

With Czech President Vaclav Klaus the chief remaining obstacle to final ratification of the European Union’s Lisbon treaty, there has been a fair amount of loose talk about how the Czech Republic could - or should - be punished if Klaus refuses to sign it.  On the one hand, supporters of the treaty say it is intolerable that the EU’s eight-year effort at redesigning its institutions should be sabotaged at the finishing post.  If Klaus carries on his delaying tactics much longer, they warn, the Czechs should be denied a seat in the next European Commission.

On the other hand, opponents of the Lisbon treaty are painting the same scenario for quite different reasons.  Just you watch, they say.  The EU will reveal itself as an intolerant, anti-democratic machine, whipping the Czechs merely because they have the temerity to resist the imposition of a treaty they fear undermines their sovereignty.

Most, if not all, of this is not serious.  Some leaders, especially French President Nicolas Sarkozy, are impatient with Klaus.  But EU governments as a whole are not threatening to punish the Czechs.  After all, the Czech parliament has approved the treaty and the Czech government is in favour of it.  Klaus is more and more isolated.

More importantly, the EU is an organisation whose first instinct is to do things by forging a consensus, not by crushing dissent.  Pace Klaus, it is not the Soviet Union reinvented.  The EU’s culture of consensus is both its weakness and, at times like this, its strength.

The EU learnt a sobering lesson in 2000, when Austria formed a coalition government including the far-right Freedom Party of the late Jörg Haider.  The EU’s other 14 member-states punished Austria by downgrading relations and freezing contacts with Austrian ministers.  It seemed a clever idea at the time.  But it ended up producing the opposite effect to that intended, by making a martyr of the Austrian government and by stiffening the patriotic pride of the Austrian people (not just Austrians on the right, either).

Moreover, the EU contains an awful lot of small and medium-sized countries, especially in central and eastern Europe, which suspect that, if ever the Czech Republic were punished for stepping out of line, their turn would come, sooner or later, over some other issue.

One final point.  Many intemperate calls to punish the Czechs have come from the European Parliament.  And it is indeed true that, if Klaus is still holding out when the parliament conducts hearings for the new European Commission, some MEPs may give the Czech nominee a particularly hard grilling.  In extremis, they could even refuse to give the entire Commission the green light because of the Klaus problem.

If they do, someone should remind them that their legislature just got elected on the smallest and most dismal turnout - 43 per cent - of any European Parliament election in history.

Everyone interested in modern Russia should read a report out this week on the nation’s deepening demographic crisis.  It’s published by the United Nations Development Programme, but it’s written by a team of Russian academic experts, so no one can say it’s tainted with bias.

The report describes the stark reality of a country whose population is falling fast, to a considerable extent because of rampant alcohol abuse among men, who on average are dying before they make it to 60 years old.  “Short life expectancy is the main feature of this crisis, though by no means its only feature.  The birth rate is too low, the population is shrinking and ageing, and Russia is on the threshold of rapid loss of able-bodied population, which will be accompanied by a growing demographic burden per able-bodied individual.  The number of potential mothers is starting to decline and the country needs to host large flows of immigrants,” the report says.

Since 1992, the natural decrease of Russia’s population has amounted to a staggering 12.3m people.  This has been compensated to some degree by the arrival of 5.7m immigrants.  But many are ethnic Russians from former Soviet republics, and the source is drying up.  Overall, Russia had 142m people at the start of 2008, compared with 148.6m in 1993.  By 2025, the figure will almost certainly fall below 140m and could be as low as 128m.

The implications for Russia’s economy are enormous.  The authors cite forecasts from Rosstat, the national statistics agency, that Russia’s working age population will decline by 14m between now and 2025.  As Vladimir Putin said three years ago when he was president, the demographic emergency is “the most acute problem facing Russia today”.

Alcohol abuse has a very long history indeed in Russia.  Some of the first western European visitors to the ancient Russian heartland were astonished to see Russians of all types, high and low, male and female, drinking themselves into oblivion.  Over time, the Russian (and Soviet) authorities came to depend heavily on revenues from alcohol sales, especially of vodka.  This deterred serious state-led anti-alcohol campaigns.

But as I remember well from several years I spent in Moscow in the mid-1980s, Mikhail Gorbachev, the reformist Soviet leader, tried to change all this, cracking down on alcohol production and sales in a way that earned him the nickname “mineral water secretary”, as opposed to “general secretary”, of the Soviet communist party.  The UN report’s authors say Gorbachev’s 1985-87 campaign had a substantial impact, raising life expectancy for men by 3.1 years and for women by 1.3 years.

Dmitry Medvedev, the Russian president, is now trying to do something similar, calling alcoholism a “national disaster”.  The Gorbachev experience suggests that Medvedev may achieve some short-term success, but not much in the longer run.

In the meantime, the really interesting question is this: Where exactly is Russia going to get all its desperately needed immigrants from?  China?  That may raise some delicate issues in Russia’s vast, underpopulated far eastern regions, which formed part of Imperial China until the Tsarist annexations of the 19th century.