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Europe:EU$

Is this enough to explain currency relationship?

Date: 6/16/2005 11:32:42 AM ( 19 y ) ... viewed 1630 times

Europe's Next Problem Is All About Money

ELAINE SCIOLINO
Published: June 16, 2005
PARIS, June 15 - It was supposed to be a celebratory summit meeting, an occasion for the leaders of the 25 European Union countries to congratulate one another for the progress made in ratifying their first common constitution.

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Thierry Charlier/Associated Press
Prime Minister Jean-Claude Juncker of Luxembourg, the president of the European Union.
Instead, national interests have trumped solidarity.

With the constitution floundering after its brutal rejection by voters in France and the Netherlands, leaders are full of recriminations and self-doubt even before they come together in Brussels on Thursday for two days of meetings.

The crisis is deepened by an angry divide on something more mundane than the fate of the 448-article constitution: money.

In addition to deciding at the meeting whether to continue to try to achieve ratification of the constitution (they will probably decide to limp along), the 25 leaders are supposed to approve the bloc's next six-year budget. That task was always going to be difficult, perhaps even impossible. But with the setback on the constitution, raw emotion has replaced the politesse that normally surrounds these meetings. Leaders have already begun to posture and position themselves for the maximum benefit of their own constituencies, not the common good.

On Wednesday, José Manuel Barroso, the president of the European Commission, the European Union's administrative body, predicted a "permanent crisis and paralysis" for the bloc if it could not forge agreement at the summit meeting on the constitution and the budget. Urging leaders to compromise on the budget, he said at a news conference, "This is not the time to play the national card."

Other officials worry that something fundamental is broken and lament the inability of European leaders to forge a common strategy for the future. "Everything that seemed to be understood about how the European Union functions is now shaken," said Günter Verheugen, a vice president of the European Commission, in a telephone interview. "They had referendums in France and Netherlands and now we are seeing the same wave of popular mistrust in other countries. In my view, earthquake is an appropriate description."

He added, "At a moment where leadership is needed, we don't have it."

But this is not a moment for political courage or bold actions. The French president, Jacques Chirac, will face his colleagues politically wounded and with the lowest approval rating of his 10-year presidency after the resounding "no" vote in France. Chancellor Gerhard Schröder of Germany has called for early elections this fall after voters repudiated his agenda for change when they defeated his Social Democratic Party in local elections in Germany's biggest state last month.

European Union countries are split between those that want to shelve or even kill the constitution, and those that want the ratification process to continue in the 13 countries that have not yet registered their choice.

The constitution suffered another blow on Wednesday when President Horst Köhler of Germany said that despite the charter's approval by both houses of Parliament last month, he would not complete ratification of it until a court had ruled on whether the charter conformed to Germany's own Constitution.

"Let's be very honest, if there was a referendum in most parts of Europe at the moment, the answer would be no," Prime Minister Tony Blair of Britain, who will assume the rotating presidency of the European Union next month, told journalists after his meeting with Mr. Chirac in Paris on Tuesday.

Since the constitution is in reality a draft international treaty governed by the Vienna Convention, it would be impossible for European Union leaders to bar members from proceeding with ratification.

As for the budget, Prime Minister Jean-Claude Juncker of Luxembourg, the departing European Union president, acknowledged on Wednesday that prospects for a deal at the summit meeting looked bleak.

"I am pretty sure we won't get the financial perspectives through at this summit," Mr. Juncker said at a European Parliament committee meeting on Wednesday, just hours before he was to circulate a compromise proposal to European Union leaders on the 2007-2013 budget.

The main stumbling block over the budget is Mr. Blair's insistence that Britain keep a special annual "rebate" from the European Union - largely related to its meager benefits from farm subsidies compared with other members - that was negotiated in 1984 by Margaret Thatcher, then Britain's prime minister. The rebate - $6.18 billion this year - has been untouchable ever since, and has partly defrayed Britain's annual contribution to the European Union budget of about $18 billion.

But Mr. Blair is still smarting from the deal cut behind closed doors by Mr. Chirac and Mr. Schröder at a European Union summit meeting in Brussels in October 2002 to keep farm subsidies until 2013.

He has made it clear that he will agree to review Britain's refund only if the European Union reduces its farm subsidies. France receives more European Union farm aid than any other member.

The dithering over the constitution and the impasse over the budget have also exposed fundamental differences among leaders and their visions for the future.

Mr. Blair made it clear that something much larger than money was at stake. "What has changed," he said in response to a question from a French journalist in Paris, "is that it is no longer possible to run Europe the way it used to be run."