Rhein on Energy and Climate

When the European Council will conclude its deliberations December 16th, Brussels will make a sigh of relief.

This has been arguably one of the most difficult years the EU ever had to master. But despite the accidents on the road, the EU deserves good notes. It has achieved much more in than expected at its beginning. It has shown once again its resilience when confronted with unusual challenges. The difficult fiscal and financial situation of several member states and the increasing awareness that Europe is losing ground globally unless it gets its act together have been powerful catalyst behind these developments.

Here are some major achievements in a nutshell:

Economically the EU has prevented a disastrous slum and moved out of the recession. With an overall GDP growth of some 2 percent and an average unemployment rate of slightly less than 10 percent it has performed better than the US economy.

It has put in place a financial safety net for Euro-zone member states, which might be incapable of coping with excessive fiscal deficits or banking crises. In May, Greece has been the test run¸ and only six months later Ireland has already been routine. It took the EU barely two weeks to agree on a rescue operation for Ireland, compared to almost two months, accompanied by sometimes bitter exchanges in the case of Greece. The EU has demonstrated its ability of inventing answers to unforeseen situation by proceeding very pragmatically.

It is about to make the financial safety net a permanent feature of its economic governance, after an expected agreement, December 16th , on the necessary treaty amendments and constitutional approval by national parliaments in the coming two years.

Assuming this operation to be successful it may serve as a precursor of additional treaty amendments that may become necessary, e.g. for changing the system of own budgetary resources.

It has basically agreed on a much stricter macro-economic policy framework, necessary to prevent a repetition of fiscal crises. This framework for the coordination of national budgets/macro-economic policies and stricter oversight of deficits and debt situation, presently in the legislative machinery, is expected to be finalised by the middle of 2011.

The newly created four agencies for financial and banking surveillance constitute the “banking corollary” to the new macro-economic and budgetary frameworks. It is the first time EU member states have admitted to pool their national surveillance mechanisms to make them more effective.

The European External Action Service has finally become operational. This has taken a long time and effort. But there is little doubt that the service will slowly make a difference and allow the EU to operate as a catalyst for the 27 member state, wherever common action may produce an added value, which will be the case more and more often.

And the foreign ministers will meet at least once every month under the authority of the Foreign Policy Chief, Lady Ashton. This will help creating continuity and familiarity.

The new Commission proves to be more productive and innovative than its predecessor. It shows a new dynamism, better cooperation among commissioners and a willingness to make changes that have been taboo for too long. The 2013 deadline for establishing the financial perspectives 2014 proves helpful to aligning expenditures towards the strategic objectives of the “EU 2020 project”. To that end, the Commission has produced medium-term policy papers for structural, innovation, energy and agricultural policies. Hopefully these will result in some major improvements of efficiency.

The institution and choice of the President of the European Council has already proved worth the small extra money. Van Rompuy has started setting his footprint on the EU agenda and its modus operandi. He has become the undisputed primus of the tandem of the two “Presidents” who share breakfast every Monday morning to go through the priorities for the week and beyond.

For the first time, the heads of government will sit together among themselves, without foreign ministers, and devote their time to debating strategic issues like energy and innovation policies.

The role of the rotating presidencies will be restricted to coordinating the work of the special council meetings like agriculture, energy and trade.

The EP has been quick to seize its new powers in the Brussels institutional setup. It is bound to assume the role of the primary legislative chamber relegating the Council to the role of second chamber.

Fiscal austerity in member states has produced a new sense of fiscal realism in Brussels. The EP and the Commission had to be satisfied with less than 3 percent increase of the 2011 budget and cannot expect big increases, if any, in the years to come. This realism will oblige everybody in the EU to make the best of scarce budget receipts and use them more than ever as leverage with banking/loan funds. The big spenders – CAP and structural funds – which account for three quarters of the budget will have to justify their contribution to the EU 2020 objectives. The CAP may not undergo revolutionary changes, but feel the pinch of more limited resources.

The Europeanization has finally also reached defence. Defence ministers have started to meet more regularly, informally in Ghent November 30 and again formally mid-December. Tight budgets force all governments to pool resources bilaterally or multilaterally, as foreseen by the Lisbon Treaty under “structured cooperation”. We shall see more of this in the coming years. But progress will be slow and uneven.

In conclusion, Brussels is more and more assuming the role of a European capital and government, with the Commission gradually turning into a true European Executive and the EP and the Council becoming the joint legislators. This will happen in new ways, associating member states, regions and civil society and thus overcoming the traditional schism between the centre and the periphery. Politicians and bureaucrats will learn to live with an interdependent multi-layer European government, reaching from municipalities to regions/provinces/ departments, national governments and the EU

Brussels will turn into a European melting pot of people and ideas. This process will become increasingly unconventional, allowing also one or more member states or civil society to launch ideas to be promoted in the European framework.

Enhanced cooperation among several member states will become more frequent in areas requiring unanimity, like defence or taxation. The European patent and trans-border divorces are likely become the first cases of application.

The second decade of the 21st century will no doubt witness far-reaching changes in the way the EU functions. The European elite have begun to understand that without much “more Europe” the old continent is heading for rapid decline. This feeling is slowly spreading to national capitals. It will make member states more inclined to accept solutions at EU level where they are no longer able to solve the problems in a national framework.

Brussels 06.12.10 Eberhard Rhein

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