Iron Tony
Daniel Schwammenthal*
Imagine for a second there had been no "crisis" at last week's European summit. Imagine, U.K. Prime Minister Tony Blair had behaved like a "good European" and accepted a cut in the British rebate without addressing the EU's farm subsidies, just for the sake of getting an agreement, any agreement, to show the world that Europe has bounced back.
Such a deal would have sent champagne corks flying through the halls of power in Brussels and the rest of the Continent. Front pages all over Europe would have featured beaming summiteers patting each other on the shoulder for a job well done. Brussels insiders and much of the press would have probably hailed Mr. Blair as a visionary statesman. It would have surely earned him the praise from such enlightened leaders as French President Jacques Chirac, German Chancellor Gerhard Schroeder and Luxembourg Prime Minister and current EU President Jean-Claude Juncker. Luckily we have been spared such a love fest of fake harmony, for Europe would have been worse off. Last Friday's showdown was exactly the kind of jolt Europe needed. Rather than exacerbating the Continent's crisis, supposedly brought about by the French and Dutch rejection of the constitution, Mr. Blair's questions about how to prepare Europe for the 21st century as he takes over the EU presidency next week could help solve Europe's real problems.
What is the true nature of Europe's crisis? It is not institutional, despite the many flaws of Brussels' technocrats and their nontransparent dealings. It is not the failure to agree on a budget, as such a deal can wait another year and even longer. And it is certainly not the rejections of those hundreds of pages of legalese which so many commentators now assume to be the starting point of Europe's disarray. Even the staunchest defenders of Valery Giscard d'Estaing's oeuvre have yet to explain why Europe couldn't continue to function without it. Rather, the rejection of the constitution, certainly in France, is a symptom of the country's and Europe's real crisis -- its economic decline. And economic policy is still primarily national policy and not formulated at EU level. The European crisis, in other words, is above all a crisis of leadership in the various capitals of the Continent, primarily in those of its three biggest economies, Berlin, Paris and Rome. It is hard to imagine that the French would have rejected the constitution if France didn't have double-digit unemployment and little economic growth.
Yes, many people, particularly in the Netherlands, are also fed up with the aloofness of Europe's political class and the undemocratic process of European integration. But in France, it was basically existential angst that was driving the No vote. This fear is also the reason so many people across the Continent are now questioning many of Europe's greatest achievements. Hence the increasingly hysterical debate about enlargement and freedom of movement. Capitalism and the mythical Polish plumber seem to have become the greatest threats to West European civilization since the days of Attila and his Huns. Western civilization in this context of course means the so-called French social model, which, as Mr. Chirac's rival Nicholas Sarkozy has pointed out, is neither social nor a model because nobody is emulating it and with more than 10% unemployed, you can't really call it social. Only the return of economic prosperity will bring Europe out of this crisis. Only with these economic anxieties removed and the confidence in a better future restored can a real debate about Europe's general direction actually begin.
In theory, it should be easy for Mr. Blair to lead the way and promote economic reforms. He could simply point to his own country, where the jobless rate is half of that in France and Germany and the economy is growing at a healthy rate. But that's not enough to overcome Europe's intellectual barriers. For Europeans accustomed to the conventional concepts of social justice, the ideas that strict labor laws might not protect but destroy jobs or that lower tax rates might lead to higher, not lower, government revenues are counterintuitive and hard to accept. That's why they are quick to believe that caricature of the heartless, neoliberal Anglo-Saxon economy and that all those favorable economic data must come at a terrible price for the "underprivileged." That's where the budget debate comes in. France and Germany brought up the British rebate as a ploy to divert attention from the French "No" vote. But it backfired badly and instead gave Mr. Blair a powerful issue to win over a skeptical European public. Unlike the debate about economic reforms, the absurdity and injustice of spending more than 40% of the EU budget on just 5% of the population bridges all other ideological divides. You don't have to be a free-market economist to understand that it is a terrible waste of resources to spend more than 40 billion euros on farmers, seven times as much as on research. And to appeal to some sort of European solidarity also rings hollow if the system is biased in such a way that France, and not the relatively poorer farmers in Poland, receives the biggest share of the pot. So when Mr. Blair presents his reform agenda today, he will do so from a position of strength and moral high ground. And a European public that only last week might have been unwilling to even consider Mr. Blair's ideas might now be more inclined to do so after having heard his arguments on the budget. This will increase the pressure on European leaders to follow the British example.
In the end, the budget is not really the key to economic progress in Europe. The 40 billion euros farm budget is only a fraction of 1% of the combined EU GDP, and shifting some of it from subsidizing farmers to subsidizing researchers is economically speaking only a marginal improvement. Scientists are definitely more important for the 21st-century economy than farmers, but financing their work through subsidies would still be very 19th century. The budget debate, though, is important as a symbolic debate, pitting two different economic views and their protagonists against each other. And the winner, as even the French press admitted (without necessarily embracing his arguments) clearly was Mr. Blair. Particularly encouraging was the reaction in Italy, where the press almost universally lashed out against Mr. Chirac. The economic daily Il Sole 24 Ore, in a front-page editorial, called the French leader "the enemy of the EU." Renato Brunetta, an economic adviser to Italian Prime Minister Silvio Berlusconi, told La Stampa that "Italy must support Tony Blair, the only one able to exercise leadership at present." Mr. Blair's attempt to reshape Europe a little more in Britain's image will probably also be greatly helped by external factors as Chancellor Schroeder will likely be voted out of office halfway through Mr. Blair's presidency. Mr. Schroder put his personal friendship with the French president above the interests of his own country. Germany, largely thanks to the EU's immense farm subsidies, is the EU's biggest net contributor. And yet Mr. Schroder wholeheartedly supported Mr. Chirac, blaming Mr. Blair alone for the failure to agree on a budget. The Christian Democrats' Angela Merkel, who looks set to become Germany's next chancellor in September, voiced her support for some of Mr. Blair's positions even though her party is much more dependent on the rural vote than Mr. Schroder's Social Democrats. Her general economic ideas also seem closer to Mr. Blair's New Labour than to the old Franco-German axis. Mr. Chirac, meanwhile, returned from the summit even more weakened than before. He now has the lowest approval ratings of any president of the Fifth Republic since de Gaulle. All in all, the state of the union looks much more promising than it has in a very long time.
June 2005
*Mr. Schwammenthal edits the State of the Union column, Wall Street Journal.
This article first appeared in the Wall Street Journal. Reprinted by Permission of The Wall Street Journal Europe. All Rights Reserved
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