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.

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.

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.

A couple of months ago, some European Union policymakers talked despairingly of how 2009 risked turning out to be “a wasted year”.  Now the EU is on a roll.  The impasse over José Manuel Barroso’s reappointment as European Commission president was removed last month when the European parliament stopped playing games and renewed his term of office.

And all of a sudden, it looks as if “a decade of deadening debate over the European Union’s institutional shape” - as British foreign secretary David Miliband puts it in today’s FT - will soon come to an end, after Ireland’s referendum on the Lisbon treaty produced a massive majority in favour.  It may not be long before the EU has its first full-time president, a new head of foreign policy and a new Commission with a five-year mandate serving under Barroso.

So is all rosy in the European garden?  Not quite.  The principal problem, as it has been for the past two years, is the financial crisis.  Time and time again, as I peek into the future, I find myself disturbed by the terrible condition of Europe’s public finances and the strains that this will put on the eurozone’s unity.

In a newly published report, economists at Barclays Capital look at the evolution of the eurozone’s public debt-to-gross domestic product ratio up to the middle of the next decade.  In one scenario, which assumes an annual fiscal adjustment of 2 per cent of GDP, 4 per cent inflation and 3 per cent economic growth, the eurozone’s average debt would be 65 per cent in 2016.  That is not bad (though it’s above the 60 per cent threshold set for new entrants into the eurozone).

But just look at the differences between the area’s member-states.  The German debt would be 40 per cent of GDP, the Dutch debt 37 per cent, the Finnish debt 12 per cent.  But the Greek debt would be 150 per cent, the Irish debt 126 per cent and the Portuguese debt 89 per cent.  In footballing terms, this would be like Barcelona and Chelsea playing in the same league as Atromitos Athens and the Tralee Dynamos.

This scenario, by the way, is not Barclays Capital’s “base case”, which is more pessimistic, estimating average eurozone debt at 90 per cent of GDP in 2016.  But the same enormous divergence between, say, Germany and Greece is evident: German debt would be 64 per cent, Greek debt 171 per cent.

With such bleak forecasts, it is entirely understandable that German policymakers dislike proposals for issuing common eurozone bonds.  But the financial crisis is testing to the limit the eurozone’s ability to conduct a properly co-ordinated fiscal policy.  When interest rates start going up again, as they will, this will present a far bigger challenge for the EU than getting Barroso reappointed or passing the Lisbon treaty.

Now that José Manuel Barroso is safely re-installed as European Commission president for the next five years, it would be tempting to think that - from an institutional point of view, at least - all is well in Brussels.  Tempting, but wrong.

Once again, it is our old friend the Lisbon treaty that is the problem.  On October 2 Irish voters, who rejected the treaty in a referendum in June 2008, will have the chance to reverse their verdict.  Opinion polls indicate that the Yes camp will win this time.  But there is an unmistakeable air of nervousness at the European Union’s headquarters that the polls may not be a reliable guide to the eventual outcome.

The fundamental problem is Ireland’s economic collapse over the past 12 months, which has plunged the government’s popularity ratings to unprecedented depths.  The public mood is as sour as a pint of stale Guinness.  In this climate, anti-Lisbon campaigners are finding some voters receptive to the argument that, since pro-Lisbon politicians ruined the economy, why should they be trusted when they say the treaty is good for Ireland?

But the Irish referendum is not the only cloud on the EU’s horizon.  For even if Ireland votes Yes, there remain considerable doubts over when Václav Klaus, the Czech president, will append his signature to the Lisbon treaty, allowing it to take force.  Fears are growing in Brussels that Klaus intends to find an excuse to delay signing as long as possible - certainly, until some time in the first half of next year.

The EU will then face its ultimate nightmare - that the Lisbon treaty will not have been ratified by the time that the UK holds its next general election, due by June.  The rampantly anti-Lisbon Conservative party is widely expected to win the election, and Tory leaders have made clear that, if Lisbon is unratified when they take power, they will call a referendum on the treaty.  All the evidence suggests the British would vote No.

If events take this course, it will poison the atmosphere in the EU and make it even harder than it is now to defend all the good things about the 27-nation bloc, such as the single European market and the successful knitting together of western and eastern Europe.  Troubling times, indeed.

In the end, it was all so easy.  A few minutes ago, José Manuel Barroso won approval for a second term as European Commission president, after a vote in the European Parliament that went 382 in his favour and 219 against, with 117 abstentions.

Barroso thus comfortably cleared the threshold of 369 votes - that is, more than half of the 736-seat parliament - that he needed in order to remove any doubts about his political authority over the next five years.  No wonder he was wreathed in smiles as he accepted a congratulatory bouquet of flowers from Cecilia Malmström, Sweden’s European affairs minister.

Under the terms of the European Union’s Nice treaty, Barroso required only a simple majority for reappointment.  That was scarcely in question, given that he didn’t face a rival candidate.  But if his tally had fallen substantially below 369, there would have been strong pressure for him to undergo another vote, because the EU’s Lisbon treaty - which EU leaders hope will come into force next year - requires the nominee to win an absolute majority.

The lingering threat of another vote would surely have weakened Barroso and complicated his task of selecting his next Commission.  It would also have damaged the EU’s image among the general European public, and it would no doubt have caused derision in certain capitals beyond the EU’s eastern frontier.

But all that no longer matters.  The real question now is how Barroso intends to capitalise on his success.  Immediately after the vote, he told MEPs that he would devote his second term to building “a Europe of solidarity and freedom”.

Like a lot of what Barroso says, this can mean everything and nothing.  It is a campaign slogan, designed to hoover up as many votes as possible from the left, the centre and the right, rather than a serious policy programme.  In his recent speeches, there hasn’t been much more detail - although, to be fair, he is promising to reorganise Commission portfolios so that there will be three new posts covering fundamental rights rights and civil liberties, internal affairs and migration, and climate change.

For the moment, Barroso has every right to celebrate his victory.  But in the coming weeks we will need to see concrete ideas from him on how he proposes to protect and strengthen the EU’s single market, persuade national governments not to undermine the common European interest, and convince European citizens of the EU’s continuing relevance to their lives.

It’s less than a week since General Motors agreed to sell Opel, its European arm, to a group led by Magna International of Canada, but already a wave of anger at the implications of the deal is building up.  Nowhere is this more true than in Belgium and the UK, where workers at GM plants seem far more at risk than their colleagues in Germany of losing their jobs.

This episode is, however, about much more than potential job losses.  It’s about Europe’s reluctance to come to terms with huge overcapacity in its car industry.  It’s about how best to preserve a broad manufacturing base in an era when the other main recent driver of European economic growth - lightly regulated financial capitalism - is discredited.  Finally, it is a test of the European Commission’s ability to uphold its strict rules on competition and state aid during the worst recession in the European Union’s history.

Lord Mandelson, the British government minister responsible for business and innovation, told the BBC this morning that he hoped the Commission (of which he was a member until last year) “should not accept anything that looks like a political fix” in the Opel deal.  This remark came very close to accusing the German government of offering shedloads of financial aid to Opel - €4.5bn, to be precise - in return for a promise not to sack carworkers in Germany as the nation heads towards a general election on September 27.

This is, of course, exactly how matters are viewed in Belgium, where politicians fear that Opel’s plant in Antwerp has been earmarked for closure.  As Kris Peeters, who heads the government of the Flanders region, bluntly put it in July: “Those who put more money on the table win.”  The Flanders government had tried its best, offering up to €500m to Opel, but the Germans crushed them with a sum nine times bigger.

The Commission made clear last Friday that it intended to study very closely the terms of the Opel sale.  According to Der Spiegel, the German news magazine, some Commission experts think the Antwerp plant may be more efficient than the Opel factory in Bochum, one of four company plants in Germany.  But don’t hold your breath on this one.  In EU institutions as much as in German politics, the power of the German car industry lobby is something to behold.

The truth of the matter is that almost no one in the EU, whether in government or in the car industry, wants to face up to the chronic problem of overcapacity.  Fiat’s Sergio Marchionne is an honourable exception, but he lost out early in the scramble for GM’s European assets.

As surely as night follows day, there will be a loser in all this.  And at the moment, it looks like being the German taxpayer.