TCS Daily

TCS EU Summit Coverage: Summit of All Fears

By Joshua Livestro - March 25, 2005 12:00 AM

This week's meeting of EU heads of state and government turned out to be a good one for some, a bad one for others. Here's a quick overview of the summit's main winners and losers:


1. Jacques Chirac

JC got almost everything he wanted out of this week's summit. The Stability and Growth Pact has been reduced to just The Pact (no more Stability or Growth please, we're Europeans!), the Liberalization of Services Directive to just The Directive. The only minor setback was over selling arms to the world's largest dictatorship.

2. Gerhard Schröder

His finest hour came when the Council ratified the German-inspired proposal to dismantle the Stability and Growth Pact. The Berlin-based newspaper Die Zeit called it "A License to Borrow." More accurately would be to say that it's a license for all European governments to spend as much as they want on anything they like. No wonder Italian finance minister Domenico Siniscalco called it "an excellent European solution to a European problem." Make-believe budgets are the new norm. It's another great triumph for German fiscal rectitude - Weimar Style.

3. George W. Bush

Basing his diplomatic approach on the old Texas saying "You can always count on the Europeans to blink first," the American president went into rhetorical overdrive last weekend in his attacks on European plans to supply arms to China in time for its planned invasion of Taiwan. The New York Times quoted an anonymous Eurocrat stating "Europe wants to move forward on the embargo, but the recent actions by China have made things a lot more complex." In Euro speak, "complex" means no decision is likely any time soon. The Brits have already indicated they will not return to the issue during their six-month presidency in the second half of this year. Looks like that invasion will have to wait another year, then.

4. George W. Bush

Or rather: Bush's nominee for the World Bank, Paul Wolfowitz. In spite of the best efforts of the Washington Post to whip up an anti-Wolfowitz frenzy on the Old Continent, Europe's finance ministers indicated that as far as they were concerned, his appointment was a "done deal." It seems Europe's heads of government see this appointment as a good opportunity to mend fences with the White House. In typical European style, however, they did insist on "more discussions" before finally rubberstamping his candidacy. To that end, they have invited Wolfowitz to attend a European talkathon at which he can explain what his plans are for reforming the world's second most useless international institution.


1. José Manuel Barroso

In a firm statement earlier this week, the Commission President pledged that he would not be held ransom by national governments' concerns about referendums or elections. He was referring, of course, to French attempts to water down the Liberalization of Services Directive. It was all nonsense, there was no link between this Directive and the outcome of the French referendum, and anyway, he had already made several important concessions on the content of the directive. Nice words, of course, but unfortunately they weren't matched by actions. In an attempt to win the 'Flip-Flopper of the Week' award, Barroso swallowed every single Franco-German demand and accepted a complete gutting of the directive. He then went on to call the end-product the result of "an important consensus." Barroso hasn't been on the job long yet, but he's starting to sound like a real European leader: spineless, that is.

2. European treaties

The good news is that all member states fully intend to keep their word on this week's agreement. The bad news is that this week's agreement is essentially an attempt to cancel all previous agreements. The death and burial of the Lisbon Agenda and the stripping of the Stability and Growth Pact of its Stability and Growth elements made it a bad week for European treaties. The antics on the liberalization of services made it a truly terrible one. Once upon a time, a greater generation of Europeans considered freedom of movement to be the core of the European project. The original European Treaty of Rome (1957) was drafted especially for the creation of a single market in which people could enjoy the Four Freedoms of movement of goods, capital, workers, and services. After this week's summit, we're down to just Three Freedoms. Well, Two-And-A-Half, really, if you consider that Eastern European workers won't have any real freedom of movement for years to come.

3. European taxpayers

The abolition (I'm sorry: reform) of the Stability and Growth Pact will prove a double whammy to Europe's taxpayers. First of all, the newly won freedom for governments to increase spending through deficit-financing means higher tax bills in the years to come. That's the way it works with increases in government spending: it's pay now or pay later - but pay you must. Taxpayers throughout Europe better prepare for tax increases in the medium term to pay for debt repayments and interest charges. In the short term, they will be hit by interest rate increases which will increase the costs of mortgages and personal loans. As one of the governors of the European Central Bank, Yves Mersch, explained, "A loosening of fiscal policy will inevitably have consequences for monetary policy." In plain English: as budget discipline goes out the window, interest rates will inevitable go up.

4. Illegal workers in Eurocrat households

Finally, spare a thought for what the Wall Street Journal called "The elephant in the room" at this week's summit, namely the army of illegal Eastern European workers currently employed by European civil servants as cleaners, carpenters and care-assistants. Until Belgium decides (or rather: is finally forced) to lift the restrictions on workers from the new member states living and working in Brussels, they will continue to live in fear of arrest and deportation. Their crime: providing a service at a competitive rate. Yes, it was another fine week in European summit history.


TCS Daily Archives