And for my next task

Date: 04/01/03

The European Union's institutional dynamism is marred by its economic sloth

HYPER-ACTIVITY is a way of life for the European Union. Last year began with the appearance of euro notes and coins in wallets from Lapland to Lisbon. It ended with the EU agreeing to admit ten new countries, including most of the old Soviet block. This year will see the launch of the EU's first-ever military operation (in Macedonia), and should end with agreement on a formal EU constitution. In just two years, the Union will have got many of the most important features of a nation-state: a currency, a military capability and a federal constitution.

What accounts for this frenzy of activity? Much of it - most obviously, the EU's enlargement to include countries like Poland and the Baltic states - is a delayed reaction to the collapse of the Soviet Union. The decision to set up an EU military arm also reflects the feeling that, after the cold war, Europeans have to do more for their own security. Negotiating the relationship between the EU's military wing and NATO has been tricky and time-consuming, but agreement was finally reached at the Union's summit last month in Copenhagen. In the next few months the first-ever EU-flagged force will take over peacekeeping from NATO in Macedonia. By the end of the year, the Europeans may also be ready to take over the larger NATO operation in Bosnia.

In subtler ways, the creation of a constitution and a single currency are links in the chain of events set off by the fall of the Berlin wall. The single currency made its appearance only last January but its creation was agreed in the early 1990s - when the ghosts stirred by the reunification of Germany convinced European leaders that a dramatic reassertion of the ideal of European political integration was required. The drive to equip the EU with a new constitution is partly because all these other developments - expansion to the east, the single currency, new security and foreign-policy requirements - demand a fresh look at how the EU operates. But the constitution-writing exercise also represents a renewed push by European federalists to ensure that their dream of “ever closer union”, culminating in a political federation, is not destroyed by the greater diversity brought into the European Union thanks to enlargement. Many of the delegates to the convention charged with drawing up a draft constitution are also acutely conscious of the diminution of Europe's voice in a world dominated by a single superpower. They hope that further moves towards European integration, enshrined in a constitution, will help the European Union stand up to the “hyper-power” of the United States.

The convention will present its work to European leaders in June. The governments will then pick over the draft for a few months, with the aim of agreeing to a constitutional text by the end of this year. It will be tough going. Several issues are still deeply controversial, including the Union's aspirations to strengthen its power in tax and foreign policy, as well as the balance between big and small countries, and between the EU's various institutions. The chances are, however, that there will be enough political will to force European leaders to reach an agreement - and enable them to end 2003 by hailing yet another triumph for the European ideal.

However, a sequence of EU victories in the conference hall may be overshadowed by events in the real world. EU institution-building will probably be a lot more dynamic, this year, than Europe's economies. And proclamations of the need for a greater Union role in world affairs and for a more unified EU foreign policy could well be mocked by the unleashing of an American-led war on Iraq and the continuing divisions in European policy the war may expose.

Throughout the 1990s the American economy outstripped the European Union's. From 1995 to 2000 it grew by more than 3% every year, a pace the EU never matched once. At a Union summit in Lisbon in 2000, Europe's leaders resolved to do something about this, promising to produce the “most competitive and dynamic knowledge-based economy in the world by 2010”. Unlike many other EU targets, however, this one cannot be achieved by administrative fiat: Europe's economy is still growing far more slowly than the Americans' one, while most of the EU countries' leaders remain reluctant to undertake the painful structural reforms to make faster growth possible.

The Euro-slug

Even the single currency, which was meant to spur growth, has so far failed to deliver. In 2002 “euroland” (embracing the 12 EU countries that use the single currency) grew markedly slower than the EU's trio - Britain, Sweden and Denmark - that have so far spurned the euro. Its advocates point to strong growth in trade in the euro area and to the euro's rise against the dollar as evidence that the new currency is beginning to thrive. But an appreciating currency could further damage the export-dependent economy of Germany, whose troubles lie at the heart of euroland's difficulties.

This economic malaise will weaken the EU's confidence as the Union attempts to assert itself in foreign affairs. The conflict with Iraq has exposed divisions within the EU, with Britain supporting the United States in its willingness to resort to force, France struggling to constrain the Americans through the United Nations, and the German government led by Gerhard Schröder still loth to endorse American “adventurism”. The outbreak of an actual war may persuade the Germans and French belatedly to play down their differences with the United States. But that might further puncture European aspirations to a clear and unified foreign policy, distinct from that of the United States.

The galling fact for European leaders is that while they are generating a mountain of paper at their convention on Europe's future, their voters are more preoccupied with the present, whose much grimmer characteristics are a stagnating economy and a foreign policy that is both muddled and divisive.

Commentary feature. The European Union's institutional dynamism is marred by its economic sloth.

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