No one should hold up Europe

By Quentin Peel

Financial Times

Published: March 24 2005

To the outside world beyond Europe's borders, and indeed to many voters inside them, the debate on a new constitutional treaty for the European Union may seem abstract and arcane.

Yet the painful process of ratifying the treaty in each of the member states is not only arousing extraordinary passions in a few but also threatens to bring vital parts of the EU legislative programme grinding to a halt.

The success of Jacques Chirac, French president, in persuading his fellow EU leaders this week to accept a dilution of the services directive - intended to free up trade in services across national borders - is merely the latest symptom of a disease of hesitation creeping through the corridors of Brussels.

Two recent opinion polls in France indicated that opponents of the constitution now outnumber its supporters. The vote is not till May 29, but the idea that France, a founder member, might vote No has caused consternation in the Union. Hence the readiness to hold back on any issue that seems to upset French voters.

That means, for example, anything that might remind them of EU enlargement - even plans to celebrate May 1 as the first anniversary of membership for the 15 new member states. Many French voters are worried about further enlargement, especially if it includes Turkey. It was a factor behind the obvious reluctance in Brussels to welcome Ukraine to join the queue after its Orange revolution.

But it is not just France that is holding things hostage. The UK is just as much at fault. The most difficult issue for Tony Blair, the prime minister, is the vital debate about future financing of the EU budget. It includes the delicate question of what to do about the British budget rebate. The annual reduction in UK net contributions to the EU, a repayment of more than €5bn (£3.5bn) in 2003, was negotiated by Margaret Thatcher in 1984. It has been declared sacrosanct by every subsequent British government. Yet the rest of the EU are adamant that in the wake of enlargement, the rebate is no longer justified. So Mr Blair will have to use the referendum card to save it.

Attempts to reach agreement on future financing are running out of steam. A deal is supposed to be reached by the summit in June, before the UK takes over the chair on July 1, in time for the money to start flowing in 2007. The chances of success are very slim, not just because of the UK rebate battle but also because of a deep divide between the six major net contributors - Germany, Britain, France, the Netherlands, Sweden and Austria - who want to cap contributions at 1 per cent of EU gross domestic product, and the poorer net recipients, which want to raise the ceiling to 1.24 per cent.

The British, French and Dutch all have difficult referendums on the constitution. Germany has a general election in autumn next year. All are too scared of their voters to reach agreement on a more generous deal.

Other issues on hold are any that might prejudge the outcome of the treaty votes - such as preparations for an EU foreign minister and diplomatic service. Proposals in sensitive areas such as social policy, or co-ordination of immigration and asylum policies, also seem to be held back.

The irony in all of this is that the two countries pleading the greatest need for "understanding" are the two - France and Britain - that did most to dictate the shape of the constitution. Thanks to Valéry Giscard d'Estaing, president of the constitutional convention, and Lord (then Sir John) Kerr, his secretary-general, the outcome was close to what Paris and London wanted. It preserved the influence of the big member states, and kept the powers of the European parliament and Commission strictly circumscribed. Yet now they are the two that most fear a No vote.

Indeed, both Mr Chirac and Mr Blair have been notable for their reluctance to argue loudly in favour of "their" constitution. Instead they allow their acolytes to present the case in favour as "keeping Brussels at bay". No wonder the No voters are picking up support.

At least the French - and indeed the Dutch, who are concerned about EU immigration rules - are holding their referendums soon, in May and June. That should clear the air. If France votes No, it will amount to a mighty political earthquake for the Union. The constitution would go back to the drawing board. But if they both vote Yes, then all the political pressure will be on Britain, plus the Czech Republic, the other most doubtful member.

Mr Blair is in a very difficult position, in both European and domestic terms. He will be in the EU chair from July 1, committed to doing deals and driving forward the agenda. Yet he will not want to agree anything - such as a new budget deal - that might make the referendum more difficult. And he seems determined to delay his referendum until at least May next year, to ensure that everyone else has voted first. The Czech Republic wants much the same. There is no majority in the Czech parliament in favour of the constitution, so the government wants a referendum to vote Yes. But there is equally no parliamentary majority to hold a referendum. No solution is yet in sight.

There really seems very little to be gained from a delay, at least by Mr Blair. He does not want to begin campaigning until he has finished the EU presidency. Yet he will be a busted flush in the EU chair, hamstrung by his fear of failure. He would be much better advised to call the vote in the autumn, and then fight the campaign as if he believed in it. Otherwise he will be damned by all for his hesitation, and may very well still lose.