EU view July 2010
Sarkozy and Merkel under fire; Europe redefines debt; ‘2020' plan back on target
Franco-German stitch-up
There has been a sense for some months that the bones of what EU leaders agree in Brussels at European summits has all but been sewn up by France and Germany in advance. The Greek bailout, financial regulation, penalties for excessive debts - policies seem to take shape before everyone has had their say.
Three days ahead of June's EU summit, Nicolas Sarkozy and Angela Merkel met in Berlin to hammer out a joint position on how to punish governments whose budgets are careering off course.
Between them, they watered down some of what the European Commission and European Parliament had been pushing for and set the agenda for the meetings of 27 heads of government.
Other governments were uneasy, with Poland and their eastern neighbours, noting that they could form a powerful counterweight and engage in a little Eurovision-style bloc voting. On this occasion, they kept their powder dry but the risk of division remains.
MEPs, on the other hand, hit the roof. Leaders of all four parliamentary groups - centre-right, centre-left, liberals and the greens - put on a rare show of unity to denounce what they see as Franco-German efforts to bypass other member states and ignore the will of the newly-fortified European Parliament.
MEPs have been enjoying the additional powers handed to them under the Lisbon Treaty and are threatening to block key legislation if Sarkozy and Merkel don't behave.
Sarkozy didn't help matters by having the summit shortened to a one-day affair instead of the usual two-day think-in because it clashed with the anniversary of a Second World War radio address by Charles De Gaulle. It was difficult to convince some that European Council summits are not falling down Sarko's list of priorities.
Meanwhile, David Cameron enjoyed a successful debut on the EU stage, securing the UK opt-out on whatever "economic governance" measures are finally agreed. But while he was basking in the glow of victory, Sarkozy was at a parallel press conference saying that the budgets of all 27 member states should be more closely scrutinised - not just the balance sheets of euro zone members. That battle is far from over.
Simpler science
Back to the big picture: EU leaders have also signed off on the ‘Europe 2020' strategy which promises to restore competitiveness and reduce inequalities. The plan has taken a back seat to pressing problems in Greece but its acceptance by governments is something of a victory for the European Commission.
Its five headline targets - tackling climate change, cutting poverty, boosting education, raising employment and increasing R&D spending - have been accepted after months of wrangling. Germany had been cold on the idea of letting Brussels set education targets while eastern member states quibbled about the definition of poverty. Several governments argued that job creation is, in itself, a de facto anti-poverty measure, but in the end, the Commission's original targets survived intact.
The promise to invest 3% of European GDP into R&D is good news for Innovation Commissioner Maire Geoghegan-Quinn who can now set about negotiating national targets with each government. Slovakia, for example, might commit to around 1.8% while Sweden will be expected to spend more than 4%.
Ireland's Commissioner has also been busy slashing red tape in EU funding schemes, pledging to simplify the system to get researchers out of the office and back into the labs.
Irish businesses punch above their weight when it comes to extracting their slice of European research money, and with national funds unlikely to expand in the near future, the EU's pot of cash might look more appealing than ever.
Debt penalties
Before the big wigs arrived in Brussels, the summit had been sold by diplomats as the first of the year that wouldn't be overshadowed by a fresh crisis. This time, it would be about long-term strategies instead of short-term panics, it was agreed.
All would have gone to plan if it hadn't been for those pesky rumours about Spain lining up behind Greece in the queue for EU/IMF bailout money. That's the trouble with unforeseen crises - they tend not to serve notice.
The meaty part of the EU summit centred on what to do when governments let their finances get out of control. Fine them, said some - although this might be counterproductive for struggling economies. Remove their voting rights, suggested others (notably Germany). But that was dismissed on the grounds that it raised the unappealing spectre of agreeing a new treaty.
So all of this has conveniently been kicked down the road to the October EU summit at which a task force headed by European Council President Herman van Rompuy will report on how best to reform economic governance in Europe.
What can be universally agreed is that ratings agencies have proven to be pests and should be more brought into line. Setting up a European agency to rate our own creditworthiness as competition to Moody's and co is one option, although subjecting ratings firms to tough transparency rules is seen as more practical.
At the same time, Europe wants to redefine creditworthiness. If member states are to be punished for running up excessive debts, it would inconveniently put France, Germany, Belgium, Italy and Ireland in the firing line beside Greece. So, the new term in town is "dynamic debt" which will measure "levels and evolutions of debt and overall sustainability".
In short, a country can have borrowings that exceed 60% of GDP so long as its debt is heading in the right direction. We're only in serious debt if you count everything we owe.
