Summit signals power shift back to governments

Date: 10/12/1998

As the EU's leaders assemble in Vienna for the Austrian presidency's showpiece meeting, eight of them are honing plans to reclaim powers and budgetary authority long since ceded to the European Commission. Tim Jones reports on a stealthy transfer of control to ministers

WHEN British Foreign Minister Robin Cook announced a year ago that "the high tide of European integration has passed", he was ridiculed at home for his optimism and condemned abroad for his pessimism.

As EU leaders gather in Vienna for their last pre-euro summit tomorrow (11 December), Cook's remarks now sound strangely prophetic.

Leaving aside all the posturing over plans to harmonise tax systems, Vienna could well set the seal on a truly historic transformation in the nature of the Union and its institutions.

Since the dying days of former European Commission President Jacques Delors' regime, the institution has been slowly bleeding power to new independent agencies and back to national governments.

Although MEPs have accrued new powers under the Amsterdam Treaty, they fear this repatriation of authority since it undermines their ability to scrutinise the EU's executive branch.

The summit will confirm that this trend is now accelerating at breakneck speed. Eight out of 15 presidents and premiers will throw their weight behind a once seemingly hopeless Dutch proposal to cap the Union's annual budget at 85 billion ecu in 2000 and index-link it to inflation until the end of 2006.

Admittedly, this plan will not survive intact through to the Brussels summit in March next year, when governments must agree a series of reforms to their spending programmes for 2000-06. But the fact that it is on the table along with the Commission's Agenda 2000 reform package and has the support of a majority of governments is extraordinary.

The Austrian presidency is taking it seriously. "The important thing is that we are now talking about two scenarios and there will have to be discussion to find a compromise between these two," says Austrian State Secretary for Finance Wolfgang Ruttenstorfer.

Step back six years. At their Edinburgh summit, leaders agreed the Delors II package of reforms, pushed up the ceiling for overall EU budgetary contributions by 0.7% of gross domestic product, expanded regional aid by 110 billion ecu and created a new 'cohesion fund' for poorer member states worth 15 billion ecu - and all this as northern Europe headed for recession.

At the same time, Farm Commissioner Ray MacSharry's reforms to the Common Agricultural Policy curbed overproduction and subsidised exports but compensated farmers in full for lower prices.

Such largesse is unimaginable today. Then, former Chancellor Helmut Kohl was prepared to accept almost anything thrown at him to win his diplomatic prize: economic and monetary union.

The idea was still alive of an embryonic federal budget which could one day be used as a tool to combat recession or stifle inflation.

At the Vienna summit, Kohl's successor Gerhard Schröder and French President Jacques Chirac - still the Union's driving force - together with the Dutch, British, Swedish, Finnish, Danish and Austrian prime ministers, will head in the opposite direction.

Their plan would see the Union budget grow to just 95 billion ecu in 2006; 10 billion ecu less than envisaged in Agenda 2000. More importantly, this would represent a shrinkage in the size of the budget as a percentage of EU GDP from more than 1.2% today to around 1% by 2006.

If they even get half their own way, the budget-freezers will be looking for deep cuts in Union spending.

Budget Commissioner Erkki Liikanen's head was buried in his speaking notes when he told finance ministers last week that their plans would mean redundancies at the Commission. He did not see the grins on eight of the faces around the table.

Nothing is safe. The 3-billion-ecu long-term youth and education programme, traditionally one of the untouchables, will not get an ecu until an overall settlement is reached.

Trans-European Networks, which are as popular as motherhood and apple pie, have been assigned a symbolic h1 rather than 5.5 billion ecu.

Without Bavarian Christian Democrats or northern Free Democrats on its back, the new German government is prepared to make farmers pay the costs of change. Impact studies suggest that a real-terms budget freeze would slash farm spending by 10 billion ecu by 2006 and threaten programmes to cushion the shock of reform for dairy producers.

Bonn is keen - and this is where it parts company with Paris - on the Commission's suggestion that farm subsidies worth 5 billion ecu could be paid out by national governments rather than the EU. Opponents are right to fear that rich governments would not hand over all the money.

Policy-making in the Union, much to the chagrin of Luxembourg Prime Minister Jean-Claude Juncker, has descended into what he has described as a "grocer's debate" over profits and losses.

Spanish Prime Minister José Maria Aznar is leading the charge for the 'Euro-visionaries' - if the 'the vision thing' is defined as hanging on to billions of ecu in North-to-South fiscal transfers which the North no longer wants to pay.

The northerners are still, however, happy to pay for new eastern members. The cash earmarked by the Commission for pre-accession aid and for countries which join the Union before 2007 has been ring-fenced.

With the overall budget capped, this means that a higher proportion of spending would go into eastern Europe.

The high tide of budget federalism has come and gone. Since the stability and growth pact designed to ensure budgetary discipline in the single currency era was signed last year, nobody has seen the EU budget as the appropriate tool for counter-cyclical policies.

Although the pact to enforce budgetary discipline in the euro-zone is enshrined in Union law, it relies on intergovernmental cooperation to work effectively, and yet Commission economists already consider the aggregate euroland budget deficit as a single variable.

As if this pain were not enough, this weekend's Vienna summit will also bless a proposal to tighten up Article 3b of the Maastricht Treaty which is meant to stop the Commission making legislative proposals unless it can prove that its aims "cannot be sufficiently achieved" by member states.

President Jacques Santer's Commission already treads carefully where Delors stamped his size-48 boots. His team has produced so many consultation papers that the 1995-98 years have become known as the 'second Green revolution'.

After Vienna, life will be even harder. Old laws will be reread and binned, while new proposals will be scoured for evidence that they break the rule of 'subsidiarity': the principle that all decisions within the Union should be taken at the lowest practicable level of government. Last year, 75 proposals bit the dust.

The Hofburg palace in the Austrian capital will be a hive of activity as British and American journalists await the next foot-in-mouth quote from a German minister and hunt out plots to force higher taxes on the UK.

Robin Cook could easily be forgiven for beginning to believe that he was wrong. But like it or not, he might well have been right.

Major feature on the trend for Member States to reclaim powers and budgetary authority long since ceded to the European Commission.