European Union’s year of destiny faces many pitfalls

The next 12 months ought to be among the most momentous in half a century of European integration since World War II. On New Year’s Day, 300 million citizens in 12 EU countries will awake to a new currency – the euro – in a spectacular leap forward for a common European identity. By the end of the year, up to 10 candidate countries, mainly from Central and Eastern Europe, are due to conclude negotiations to join the wealthy, West European bloc. Between those two milestones, an unprecedented Convention on the Future of Europe will begin to debate far-reaching reforms of the Union, possibly leading to a European constitution. The EU’s embryonic rapid reaction force for crisis management will become partially operational from January 1. And EU leaders hope to give a new impulse to their drive to make the 15-nation bloc the world’s most competitive knowledge-based economy at a summit in Barcelona in March. But as so often in Europe, the reality could be less edifying. The road ahead is strewn with potential pitfalls that could cause delay, setbacks and disenchantment. On balance, I believe the euro will be a success and enlargement will happen on time, provided they can work out some deal on agriculture, said Charles Grant, director of the Center for European Reform, a British think tank. At worst, Barcelona could achieve very little, the enlargement talks could be held up on agriculture, the Irish could hold another referendum on the Nice treaty and vote ‘no’ again. A lot could go wrong, he said. Other analysts point to the possibility of elections in France and Germany delaying or derailing the enlargement talks and the risk of a crisis between Turkey and Greece over Cyprus. And the EU’s common foreign and security policy could be severely strained if the United States launches military action against Iraq. Britain would be likely to back Washington, France would probably oppose it. Others would be torn between the two. Euro teething troubles? EU officials fear massive media coverage may amplify any teething troubles when euro notes and coins enter circulation. The changeover is the biggest peacetime logistical operation in history, involving the issuance of 15 billion banknotes and 50 billion coins in an area stretching from Portugal to Finland. If the rollout goes well, it should boost the EU’s popularity and make the three member states that opted out – Britain, Sweden and Denmark – keener to join. Policymakers from European Commission President Romano Prodi down are convinced that in the medium term, sharing the euro will give EU citizens a sense of pride and shared identity and increase pressure for a more coordinated EU economic policy. German Foreign Minister Joschka Fischer has called it a profoundly political project. Brussels hopes the switchover, due to be completed by the end of February, will be as big an anticlimax as the millennium bug, making a nonsense of advance scare stories. But EU officials say they fear weeks of headlines about little old ladies being confused or diddled, slot machines not working, counterfeit new notes circulating, and fake old money being exchanged for genuine new cash. European leaders are struggling to counter a widespread public perception that retailers and service providers are using the changeover to sneak through hidden price increases, despite the lack of statistical evidence to support such fears. It is very difficult to discern any effect on price development stemming from the cash changeover, European Central Bank President Wim Duisenberg told the European Parliament this month in response to several questions from worried deputies. Problem of elections The conclusion of accession negotiations with a wave of former communist states should seal the peaceful reunification of Europe more than a decade after the end of the Cold War. But the most sensitive bargaining on agriculture and regional aid – which jointly account for nearly 80 percent of the EU budget – lies ahead. A series of elections could slow the pace of enlargement talks and add complications. French President Jacques Chirac, the farmer’s champion, and his likely presidential rival, Prime Minister Lionel Jospin, may vie to take the hardest line on preserving agricultural subsidies for existing EU members and denying them to newcomers. Diplomats say French politics may prevent the EU agreeing on any common bargaining position on agriculture until May or June. Some fear a crisis on farm subsidies if Chirac is re-elected. Similarly, it may be difficult to agree on a common position on regional aid before Germany’s late September general election, leaving little time to wrap up talks by December. Berlin is the EU’s main paymaster and the conservative opposition seems set to make the hidden costs of enlargement an election issue, especially if Bavarian Premier Edmund Stoiber is Social Democratic Chancellor Gerhard Schroeder’s challenger. Other factors that could blow enlargement off course include a potential fiscal crisis in Poland, and a possible breakdown in UN-sponsored peace talks on Cyprus that would raise the prospect of the EU admitting a divided island against Turkey’s opposition. Convention’s potential Another uncertainty is the course of the advisory convention of national and European parliamentarians and government representatives on EU reform that opens in March, chaired by former French President Valery Giscard d’Estaing. For the first time, the debate about the future shape of the Union is coming out from behind the closed doors of intergovernmental negotiations to be aired in a public arena. Brussels is abuzz with excitement at the prospect of an unscripted exercise in charting the bloc’s future that could take on its own dynamics, forcing EU governments to make bolder changes than they would otherwise accept. The convention, to conclude in spring 2003, could turn into an unruly talking shop or an academic exercise in institutional architecture. If it does, member states may ignore or eviscerate its proposals when they revise the treaty in 2004. But at best, it could breathe new life into the search for a more democratic, more responsive, less remote and less bureaucratic union. That would make 2002 a landmark year indeed.