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February/March
2004- CER BULLETIN, ISSUE 34 POLAND:
THE EU'S NEW AWKWARD PARTNER As a former member of Poland's communist Politburo, Leszek Miller has little in common with Margaret Thatcher or John Major. But the Polish prime minister has adopted very similar negotiating tactics in the EU. At the Brussels summit in December 2003, Miller stubbornly refused to give up any of the votes allocated to Poland in the Nice treaty, although they give Poland nearly as much weight as much larger Germany. In a style reminiscent of Britain's Conservative prime ministers, he presented himself as his country's defender against a Franco-German plot. Yet most EU governments saw Poland's refusal to negotiate as indefensible, and it denied the EU a fairer system of voting that gives an equal weight to every EU citizen. Miller's obstinacy was not the only reason for the collapse of the negotiations on the EU's new constitution - France, Germany, Spain and others share responsibility. But it showed how domestic politics in the new member-states will affect their behaviour in the EU. The new members will not be pushovers, and Poland could be extremely vociferous, especially in the fight over the EU's budget later this year. The danger is that Poland could become awkward for the sake of it. Europe needs Poland to be a constructive partner. In addition to being by far the largest of the new member-states, Poland has an active foreign policy and a commitment to both NATO and European defence. Warsaw could play a significant role in forging a better relationship between the EU and its eastern neighbours, particularly Ukraine and Russia. But if Poland behaves unreasonably, it will punch below its weight in EU policy-making. Awkward behaviour looks likely, at least for the first few years after Poland's accession in May. While the EU was assessing the fallout from the collapsed constitutional talks, Leszek Miller was greeted with applause on his return to Warsaw. With his government gravely weakened, Miller found his tough EU stance to be the only area where he enjoys the support of all political parties. It was his main opponent on the right, Jan Maria Rokita, who coined the slogan "Nice or death". But short-term political gain was not the only reason for Miller's hard line. Many Poles were pleased to see their prime minister say no to Germany and France because they resent how the EU has treated Poland in the last few years. In December 2002, Polish hopes for generous help from the EU budget were bitterly disappointed in the last stages of the accession talks. A few months later, during the run-up to the Iraq war, French President Jacques Chirac berated the EU's members-to-be for supporting US policy, chiding them as if they were small children. Then came Poland's problems with Germany. Some of the descendents of Germans forced to leave lands that became Polish after the Second World War have called for a memorial for the expelled populations. The German government has publicly distanced itself from this call, but the issue has stirred up anger in Poland about the country's treatment during the war. This sequence of events has given many Poles the impression that they need extra votes to defend their interests. It reminded many of the times in history when great European powers rode roughshod over Poland. When Poles talk about their country's voting weight in the EU, much more is at stake than how the Council of Ministers works, because old resentments and recent insults are mixed into the debate. Like the British, Poles are often mistrustful of the intentions of the other member-states - albeit for very different reasons. Rather than fearing a federalist plot in Brussels, as the British often do, the Poles worry that the large EU countries will simply disregard their interests. Poland will again become an awkward partner in a few months time, when the 25 members start debating the next EU budget for 2007-13. Few Poles understand the details of the current budget settlement, but many know that this year Polish farmers will get only a quarter of the subsidies going to their counterparts in France and Germany. The country is determined to do better in the next round of budget talks. Polish demands for more money will clash with Germany's main objective of keeping the overall size of the budget in check. Some German politicians want to make Poland pay for its intransigence over voting weights by giving it less money. This battle arrives at the wrong moment, just when Germany and Poland need to find ways to overcome their differences. Their bilateral relationship is central to making the enlarged EU work, because it is the bridge between old and new Europe, and between east and west. Moreover, Polish intransigence plays into the hands of those who argue that enlargement will result in gridlock, and that a 'core Europe' led by Germany and France is the only way forward. In the 1990s, Germany and Poland enjoyed an unprecedented period of reconciliation and co-operation to overcome historical grievances. But relations have worsened over the past two years - diplomats claim that they are now at their lowest ebb since 1989. Many Germans feel betrayed by Poland's opposition in the constitutional debate. It was Germany, after all, which was Poland's strongest supporter in the accession process. Poles, meanwhile, resent what they see as Germany's ungenerous welcome to the new members and fear Germany's renewed partnership with the French, who eye enlargement with suspicion. If Poland is to be a constructive member of the EU, it needs a more comfortable relationship with Germany. Then Polish leaders will be able to make concessions to their European partners without being accused of betrayal. Poles need to gain a sense that the EU works through compromise, and that they are better off with a Union in which countries seek to accommodate one anothers' interests. The danger is that Poland will habitually adopt a stance of 'no compromise' - and thus have as little influence on the EU's development as Britain often did. Heather
Grabbe is deputy director of the CER. POLICING
PUBLIC SECTOR AID
In recent years, EU member-states have steadily liberalised many economic sectors, such as energy and telecoms, which were previously state-owned. The European Commission has played its part by applying tough state aid rules which restrict the ability of governments to subsidise private firms that operate in these markets. The unions claim that recent European Court of Justice judgements have gone further, by calling into question the subsidies that member-states can pay not just in recently liberalised markets, but also for key public services, such as local buses. The unions argue that unless the EU explicitly exempts such services of general interest from EU competition laws, the Commission will gradually force member-states to liberalise all public services. Several member-states back the unions. The French government insisted on a clarification of state aid rules in exchange for agreeing to energy liberalisation at the Barcelona summit in March 2002. Jacques Chirac even got Tony Blair and Gerhard Schröder to draft a joint letter calling on the Commission to respect the 'special nature' of services of general interest. Businesses, however, firmly reject this view. They point out that EU law already permits governments to pay subsidies to firms that carry out services which are socially important but uneconomic, such as delivering post in remote areas. Businesses claim that any suspension of state aid rules would simply end up protecting former monopoly providers, such as the French energy giant EdF, from meaningful competition. In the longer term, businesses and consumers would face higher prices, further eroding Europe's economic competitiveness. The Commission must soon decide whether it will draft a framework directive. At the moment, it does not know what to do. On the one hand, competition commissioner Mario Monti has fought hard to crack down on state aid, in particular to operators in newly liberalised utility markets. On the other hand, the Commission is obliged to follow up the request by the Barcelona European Council to review the rules for services of general interest. And politically, it does not want to be seen as forcing liberalisation on reluctant governments in sensitive areas such as health, education and transport. The best solution is for the Commission to focus on clarifying existing rules, as the case for a new framework directive is unproven. The strongest argument for avoiding a directive is that member-states fund and provide public services in very different ways across the EU. A service that one country regards as the sole preserve of the state may be privatised in another. For example, in Denmark private firms provide emergency services, but the state directly manages all prisons. In contrast, while private prisons are commonplace in Britain, the state is the sole supplier of emergency services. Even France, while highly protective of state-owned services such as railways, has long taken a very liberal stance on its water supply. If the Commission tries to define catch-all rules in a single framework directive it risks diminishing this diversity. Moreover, since existing EU law provides significant room for memberstates to provide and subsidise important services, a new framework directive is unnecessary. Under the current rules, the Commission must adhere to the neutrality principle, which means it cannot pass judgement on whether a private or public firm should provide a service. Moreover, it is the member-states, rather than the Commission, which define the services they regard as in the 'general interest'. And member-states are allowed to pay subsidies to such firms, provided this aid is proportionate to the costs of the service and does not impede crossborder trade. Consequently, the Commission has no powers to regulate many services, such as hospitals or swimming pools, which are supplied at a local level. However, the Commission does need to clarify the impact of the recent Court of Justice judgements on its state aid rules. In the Altmark case of 2003, the Court ruled that a member-state could only subsidise bus services if the payment was fully transparent. The Court suggested that the best way to ensure transparency was through a tendering process. The Commission should support this principle and develop guidelines for national and regional governments. However, the Commission should state explicitly that member-states do not have to award such contracts on the basis of price alone - and that they can consider other social objectives. Finally,
the Commission should stress that its aim in policing state aid is to stop
anti-competitive behaviour in markets already open to competition, not to
force the liberalisation of all public services. For the foreseeable future,
the Commission's focus will be on recently liberalised markets, such as telecoms
and energy, where dominant players could misuse the subsidies they receive
for providing a public service. For instance, the Commission has forced Deutsche
Post to repay some of the aid it has received for running a universal postal
system in Germany. The Commission successfully argued that Deutsche Post was
using the money not to fund remote postal deliveries, but to buy rival companies
abroad. The Commission would find it harder to take such action if a new directive
exempted services of general interest from state aid rules. JOBS
FOR THE BOYS Last year may have been an annus horribilis for the EU, but 2004 looks set to be just as divisive. In between negotiating a new EU budget and a possible starting date for Turkey's accession negotiations, EU leaders have to choose a new Commission president. If and when EU leaders reach agreement on an EU constitutional treaty - sometime in 2004, hopefully - they are likely to create two new posts, that of European Council president and EU 'foreign minister'. The EU will find that agreeing a candidate to replace Romano Prodi as Commission president is exceptionally hard. Member-states will have to strike a balance between large and small countries, between the left and right of the political spectrum, and between federalists and inter-governmentalists. The risk is that leaders will spend an inordinate amount of time and energy on the decision - but still end up appointing a second rate compromise figure. While there is a large pool of senior politicians to choose from, it is striking how few impressive candidates have emerged. This is a shame since the last two Commission presidents, Romano Prodi and Jacques Santer, have both been disappointing. Europe desperately needs strong leadership at the top of its institutions. The most credible candidates come from smaller member-states and are little known outside of Brussels political circles. António Vitorino, for instance, has been widely tipped for the post of Commission president. Vitorino has won many admirers as commissioner for justice and home affairs. But he is also a socialist who may not have the full support of the right-wing Portuguese government. Moreover, the European People's Party looks set to win the European Parliament elections in June 2004. It has already demanded that the next Commission president comes from the centre-right. That reduces the chances of Paavo Lipponen, former prime minister of Finland, who is interested and respected, but a social democrat. The same objection applies to Costas Simitis, the out-going Greek leader. Consequently, Jean-Claude Juncker, the long-serving Christian Democrat prime minister of Luxembourg, has emerged as the front-runner to become Commission president. Both France and Germany have hinted strongly that they are backing the experienced Juncker, who would have the support of many of the smaller memberstates. Tony Blair is said to dislike him, but since the decision to appoint the next Commission president will be taken by a qualified majority vote, no single country can block a consensus. If the centre-right Juncker does become the next Commission president then Paavo Lipponen may switch his attention to the proposed European Council president job. Finland was fiercely opposed to the creation of this post, but if Lipponen's candidacy was successful, it could reconcile Finland to the creation of a Council president. Other names mentioned for European Council president are the Danish and Belgian prime ministers, Anders Fogh Rasmussen and Guy Verhofstadt. Both men are regarded as effective political operators. But both are also viewed with some suspicion because of their stances on the war in Iraq, which Rasmussen strongly supported and Verhofstadt deeply opposed. At some point, the EU will also need to fill the new 'foreign minister' post. Javier Solana's term is likely to end before the constitutional treaty will take effect. In this case, EU leaders will probably ask Solana to carry on for a few more years, with expanded powers. That outcome would suit Joschka Fischer, the charismatic German foreign minister, very well. He remains the front-runner to become EU foreign minister, but Fischer has indicated he wants to seek a third term in office in Germany. But since the post of foreign minister is unlikely to come into effect until well after the next German elections in 2006, this should not be an obstacle. The
EU jobs merry-go-round will start after the June European Parliament elections,
when the European Council must put forward its candidate for Commission president.
It will fall to the 25 presidents and prime ministers of the enlarged EU to
please just one of the candidates - and disappoint all the others. But the
beauty of the EU is that negotiations are never really finished. Those who
fail to become Commission president can set their sights on a heavyweight
portfolio as commissioner or, later, the job of European Council president
or EU foreign minister. The end result is most likely to be a classic EU compromise
- something no one wants but everyone can accept. In the process, EU leaders
could sour the overall political climate inside the EU, and distract attention
from much-needed political and economic reforms. Europe deserves better. CER
IN THE PRESS
EU
OBSERVER EUROPEAN
VOICE LE
MONDE THE
TIMES FINANCIAL
TIMES FINANCIAL
TIMES 29th December 2003 “Where is the clear, consistent, unified EU agenda for the long-term development of Ukraine, let alone Moldova?” asks Heather Grabbe, deputy director of the CER. Eastern Europeans will not shy away from conflict in order to force the EU to use its soft power to help these countries – or to develop what Grabbe calls a “tough love” strategy toward Russia. THE GUARDIAN 29th December 2003 Charles Grant, of the CER, believes that France and Germany have behaved “so badly for so long” that their reasonable argument on what is probably the best available voting system for Europe will not get the hearing it deserves. In choosing to back the Polish and Spanish positions, a choice Grant describes as “ludicrous”, the British have withheld support from the Germans and the French just as they were mending fences with them on defence and such issues as policy towards Iran. Centre for European Reform © CER 2004
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