Bust-up overshadows progress on enlargement

Date: 31/10/02

Dana Spinant reports on the conclusions of the European Summit in Brussels

CRISIS? What crisis? Dire predictions of a bust-up between Germany and France ahead of last week's Brussels summit on the funding of enlargement largely came to naught after Jacques Chirac and Gerhard Schröder reached an accord before the main event began.

Instead, it was an angry exchange between the French president and UK premier Tony Blair that grabbed the headlines.

Chirac was infuriated by Blair's attempts to water down the Franco-German deal which largely maintains the present system of farm subsidies until 2013 - and told him so in no uncertain terms in front of other leaders and officials on Friday.

Chirac allegedly said: 'You have been very rude, I have never been spoken to like this.'

Initially, officials in London and Paris tried to play down the exchange as part of the normal cut and thrust of politics, but Chirac's later decision to postpone December's Anglo-French summit at Le Touquet suggests a deeper split.

Their spat somewhat overshadowed the most positive aspect of the summit: by backing the Franco-German accord, albeit unenthusiastically, member states cleared the way for enlargement negotiations to be completed at Copenhagen in December.

Under the deal, it was agreed that from 2006 the EU farm budget should rise by only 1 per year - below the expected rate of inflation - meaning direct subsidies will fall in real terms. However, the leaders postponed major decisions on financing, setting the scene for a mother-of-all budget fights in 2006, when decisions on funding the Union until 2013 will be taken by 25 states, rather than the existing 15.

Although it cannot be automatically deduced that reforms of the Common Agricultural Policy (CAP) have been postponed indefinitely, the Commission's mid-term review proposals now have little chance of being applied before 2007.

Direct payments to farmers from present EU countries will remain stable until 2006, while the entrant countries' farmers will see their subsidies increasing from the 25 of the current EU level to reach parity in 2013.

However, the agreement to cap direct payments at the 2006 level until 2013, together with a progressive increase for new members, means farmers in the current EU will progressively lose out. 'Everybody will have to make an effort,' French Foreign Affairs Minister Dominique de Villepin said.

However, the capping applies only to direct payments and not the 'second pillar' of CAP, covering rural development programmes. Diplomats said this would allow some flexibility in the system and compensate for the reduction in market support measures.

It is unclear whether the deal will benefit Chirac more than Schröder in the long term.

Diplomats initially suggested the German chancellor had been outmanoeuvred by Chirac into accepting a deal which made too many concessions to France.

The agreement certainly ensures that the expensive farm subsidies, of which French farmers benefit greatly, will continue for at least a decade. Germany, the Netherlands, Sweden and the UK had called for deep cuts in farm spending; instead it will rise from the present €45 billion to €48 billion by 2013.

Schröder also fell short of his aim of reducing direct payments to present EU members while phasing in subsidies to new countries. However, he did manage to avoid an explosion of agricultural spending after 2006 and the 1 increase will limit Germany's future budget contributions.

But undoubtedly the most important thing Schröder gained from the controversial deal is enlargement itself, by winning support from a reluctant France to open the door to 12 candidate countries, ten in 2004 and two in 2007. France has long been cool on the idea of enlargement, which it sees as being more beneficial to Germany, both politically and economically.

The Brussels summit witnessed a return to the centre-stage of the Franco-German alliance, the motor of EU progress for the past 50 years. Although some small states and the UK may fear a revival of 'pre-cooked' deals between Paris and Berlin, leaving the rest to merely work out the details, diplomats welcomed a return to good relations between the Union's powerhouse pair.

'Germany and France know how to answer expectations,' de Villepin said last Thursday, predicting that Franco-German 'entente' would make the summit a success.

He was right to a degree. But the old style pre-cooked deal completely overshadowed the main event.

There may also be a risk that the reactivation of the Franco-German engine will leave the UK feeling marginalised.

In addition, small EU countries would fear that the prospect of a 'directoire' - alliance of the big - running the EU now looks more likely.

Report on the conclusions of the European Council, Brussels, 24-25 October 2002.