The entire European Union project is in its worst crisis ever after the breakdown of the negotiations over a new constitution. The summit in Brussels ended in an "extraordinary fiasco”, as the Swedish news agency TT commented. This is only a few weeks after the effective breakdown of the so-called stability pact of the euro-zone. What are the reasons for this crisis and what is the likely outcome?

Italy’s Prime Minister Silvio Berlusconi aimed to crown his period as EU president with the ratification of the new constitution. Instead, he had to give up on his attempts at lunch time on Saturday, when the Polish Prime Minister Leszek Miller was on his way home. Also the French delegation had packed their bags by then. "It became impossible to reconcile the contradicting views", Berlusconi admitted.

Biggest failure

This is the first time a summit has failed to negotiate a new treaty. Previous promlematic summits – Maastricht 1991, Nice 2001, Copenhagen 2003 – all ended in some kind of compromise. "In reality, it was almost ten years of preparations for enlargement, 18 months of democratic debate in the European convention and two and a half months of governmental negotiations which ran into the wall", declared the Danish paper Politiken, which regarded the outcome of the meeting as a "shock".

The purpose of the constitution was to prepare the EU for the accession of ten new member states on 1 May 2004. The proposal included a new EU president instead of the present rotating system, a common foreign minister, abolition of veto rights on several issues, and fewer EU commissioners. The aim was further integration and ’harmonisation’.

The hardest nut to crack, however, was the proposed voting rules. The draft proposed a ’double majority’ system for decisions, i.e. support from 50 per cent of the states and 60 per cent of the population. This would have increased the power of Germany. According to the present rules, agreed in Nice two years ago, Spain and Poland have almost as many votes as Germany, despite Germany’s population being bigger than these two combined.

But the Polish and Spanish politicians not only fought for their influence within the EU. Both Leszek Miller and Spain’s Jose Maria Aznar used the EU debate in a nationalistic way in an attempt to win back support they have lost at home because of their backing for the US war and their neo-liberal economic policies. Also the governments of the bigger EU powers are under pressure from economic crisis and massive political discontent. France was shaken by two one-day public sector strikes this Spring, in Germany the mass demonstration on 1 November marked the beginning of increased strikes and widespread struggle.

Power and economy

Bush’s and Blair’s war against Iraq was the catalyst bringing tensions in the EU to the surface. The ruling classes of Germany and France were not prepared to blindly obey the Bush doctrine of the US, to give a blank cheque to pre-emptive military attacks. At the same time, the Bush administration encouraged splits within the EU, where the Franco-German axis was challenged by Britain, Spain, Italy and others among the older member states, as well as by the applicant states. The split between the US and Germany-France was partly covered up by the quick conclusion of the war, but has re-emerged with the growing problems facing the US occupation forces.

The other main crisis factor within the EU is the economic crisis. The euro-zone economy will not grow this year, with actual recession for parts of the year in Germany, the Netherlands and Italy. This has resulted in an increased pace of cuts and counter reforms, plus higher unemployment. The Netherlands has implemented a wage freeze, Portugal has sacked thousands of public sector workers, France, Austria and Greece have reduced pensions, Germany is attacking the benefits of the unemployed and the sick etc.

The budget rules of the EU – the so called stability and growth pact – have become a millstone around the neck of the European economies. The pact demands that the total public sector deficit is below 3 per cent of GDP (over a period it should be in balance). The public sector debt must be less than 60 per cent of GDP. Despite most governments, like Belgium and Sweden, improving their books by including public pension funds, the deficits are growing everywhere as a result of non-existent economic growth.

Last year Portugal was already forced to make massive cuts to reduce its deficit. But Germany, and even more clearly France, have refused to obey the rules. For three years in a row, the two countries’ deficits have exceeded three per cent. France also has a state debt exceeding 60 per cent of the GDP.

The euro-zone countries are supposed to be fined if they break the rules. Between 0.2 and 0.5 per cent of GDP (depending on the size of the deficit) should first be deposited with the EU. This amount can later be transformed into a fine.

The negative effect of the pact can easily be seen in Portugal, where the measures led to a slump and the deficit is now rising again.

On 25 November EU Finance Ministers, however, decided not to punish France and Germany. Against were ministers from Austria, the Netherlands, Finland – and Spain. The Spanish government thereby indicated its determination in the pending struggle over the constitution.

The breakdown of the existing rules of the stability pact does not mean that the straightjacket has been swapped for a general policy of economic stimulus. Tax cuts for the rich and for companies in Germany, and increased spending on the military and police in France are factors behind the increased deficits, alongside the austerity policies against ordinary people.

Increased doubts

These two serious breakdowns within a month are a result of the new world situation, economic instability and the enlargement of the EU. The German capitalists and politicians in particular have been a driving force behind enlargement, for economic gains and to create greater political stability. But the closer actual enlargement comes, the bigger the doubts. Instead of the drive towards enlargement, going their own way has become the main idea of the ruling classes in Germany and France.

The threat of the Polish government to use its veto at its first summit is one example that the previous conciliatory approach within the EU has disappeared. The dominance of the French and the German governments has been weakened. Additionally, the collapse of the present stability pact has undermined the EU in relation to the new member states. Only three out of ten new states have deficits in line with the rules of the pact.

This is why the German chancellor Gerhard Schröder and the French president Jacques Chirac were so eager to reach agreement on the proposed constitution. In order to strengthen their position the British Prime Minister Tony Blair was invited to join an unofficial ’trilateral’ leadership grouping. The most concrete outcome was the decisions on military cooperation, where EU states who so wish can form an inner military nucleus, partly outside both the EU and Nato. Despite being part of this agreement, Blair has assured Washington that this cooperation is not a challenge to the superiority of the US.

EU at different speeds

The German foreign minister Joschka Fischer warned after the fiasco in Brussels that the EU could split into two parts. This is a scenario for which the German and the French governments have been preparing. "According to the French president, the main powers of Europe must ’seriously consider’ an EU at several different speeds" (quoted by Politiken). Chirac spoke of "pioneer groups" of countries acting in advance of others. Schröder also referred to a division of the EU into different levels.

Militarily, there is already an agreement between Belgium, Luxemburg, Germany and France. The Netherlands is usually also named as part of the inner nucleus of the EU. Exactly on which issues they would ’go first’ on is however not clear, because these states and their rulers do not lack contradictions amongst themselves.

The constitution itself is less important than the political crisis and the loss of prestige caused by the fiasco. Technically, the EU has rules in place without the constitution. The Swedish daily, Dagens Nyheter, says it would be "meaningless" to restart the negotiations in the New Year, when Berlusconi is replaced by the Irish Prime Minister Bertie Ahern. And even if they achieve a compromise on the constitution, it still remains for the member states to say yes. Seven states have promised referendums. Among them are Ireland and Denmark, where No campaigns won some of the latest EU referendums. The Swedish Prime Minister Göran Persson was among those advocating all negotiations to be postponed until the second half of 2004 or even 2005.

More important, Dagens Nyheter in its editorial asks "Will the EU hold in a future with 25 member states". This shows how even the most prominent EU supporters, no longer know which EU they are defending. The deep crisis can lead to an EU which is a ’mini United Nations’, where leaders meet and talk, without reaching any real decisions. It is obvious that federal ideas, to move power to an executive in Brussels, are now weaker than for a long time. The Dagens Nyheter reporter, Ingrid Hedström, predicts a possible "changed EU where a new nucleus is taking shape".

The deep crisis shows that the capitalists and the politicians cannot reach their dream of a united Europe, with a free economic market and political/military muscles strong enough to challenge the US as a world power. The governments of the big countries, representing their countries’ capitalist classes, are not prepared to give up really decisive powers. The contradictions between the interests of the capitalists in different countries are too big.

Already in the spring of 2004, new conflicts will appear, this time over the new budget of the EU, to be implemented in 2007. Germany has warned Poland and Spain that their grants will be cut as a result of recent debates.

The whole euro-zone will be economically shaky, with the possibility that the economic and political crisis in Germany even leads to a break up of the euro. The new member states are therefore very far from ever entering the euro.

One thing is sure, however, the politicians will continue to agree with each other on attacks on workers, young people, pensioners, refugees and other groups. The present attacks in Germany and France are only a prelude to what the capitalists demand. These attacks will further increase the gap between the rulers and ordinary people in EU countries. According to a recent EU survey, only 48 per cent of EU inhabitants see the EU as something positive, the lowest figure ever. The EU elections in June will most likely see the lowest participation ever, but also give opportunities for new alternatives. Nationalist parties will attempt to gain from the crisis of the EU. The necessity to make the trade unions into fighting organisations and to build new mass workers’ parties is therefore urgent.

From this week’s issue of Offensiv, the weekly paper of Rättvisepartiet Socialisterna.

 

 

 

 

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