The European Union. Outlook: gloomy

The EU agenda is being hijacked by worries over referendums on its constitution

LAST week's European Union summit in Brussels might have been worse. But it is quite hard to see how. The purported “relaunch” of the Lisbon Agenda of economic reform left it saddled, as before, with too many empty promises and too little genuine action. The assembled leaders told the European Commission to rewrite (ie, substantially withdraw) its planned directive to liberalise trade in services, the most important remaining single-market proposal. They tore up the euro's stability and growth pact, adding so many exemptions as to make its fiscal strictures on governments largely meaningless, but without formally scrapping the pact's bizarre notion of “fines” on miscreants. And they made no progress on the EU budget, beyond a gratuitous demand by France's president, Jacques Chirac, to end the British rebate negotiated by Margaret Thatcher in Fontainebleau two decades ago.

Not for the first time, indeed, the summit was suffused by big differences between Mr Chirac and Britain's prime minister, Tony Blair which mirror a broader battle over the direction that the EU ought to take. Mr Chirac's declared aim is to rein in the “ultra-liberals” in the commission, whom he accuses of using the cloak of economic reform to undermine Europe's much-vaunted social model. Mr Blair, by contrast, wants Brussels to reinvigorate Europe's stuttering economy by further liberalisation and the injection of more competition. Quite soon, a new front will open up when the commission proposes to toughen its rules against state aids - only, yet again, to run into French (and doubtless also German) objections.

Each side in this battle has its supporters, which is one reason why there is no clear majority for either. Mr Chirac counts on the backing of fellow leaders from Germany, Spain and Belgium; Mr Blair on those from the Netherlands, the Scandinavian countries and Ireland. More importantly for the British, the commission under its new president, José Manuel Barroso, along with most of the eight new EU countries from central Europe, are in the liberalising camp, tilting the balance significantly in their direction.

Ratification nerves

The outcome of this battle, which might be caricatured as one between liberalisers and protectionists, is critical to the EU's future. But it is now being put on hold by the emergence of a new, extraneous factor: the EU constitution. What is nagging Europe's political leaders is not the text, which they grumpily signed up to last year, but the difficulty they are having getting it ratified. Mr Chirac's concern is the most pressing: France's referendum on the constitution will be held on May 29th, and five opinion polls in a row have now come up with solid majorities for the no side. As many as eight other leaders face tricky referendums over the next 18 months, including Mr Blair, who plans to hold Britain's vote on the constitution some time in the first half of 2006.

The French referendum cast a dark shadow over the Brussels summit. Nobody present dared to say or do anything that might have upset Mr Chirac. That explains why his fellow leaders gave in so readily to the French president's insistence that the only way he could win his vote would be if they dropped talk of further economic reform, scrapped the services directive and made preservation of Europe's social model their priority. Mr Chirac has even barred Mr Barroso from campaigning in France, for fear that his ultra-liberal image might serve to galvanise the no vote.

Optimists about the EU might hope that, if the French in fact vote yes, the agenda of economic reform can then be revived. Yet Mr Chirac's strong opposition surely makes that unlikely. And, in any case, no sooner will the French hurdle be jumped than others will loom - the biggest being in the Netherlands (which votes on June 1st), the Czech Republic and Britain. The pressure will be on to say or do nothing that might be used by the no campaigners in these countries. That will almost certainly sink any chance of a deal on the EU budget, for example, since the British rebate will have to be seen to be “non-negotiable” at least until the British referendum.

It is bad enough that the entire agenda of EU business should be hijacked in this way. What makes it worse is that such negative tactics are being pressed into service for the sake of such a constitution. They may backfire anyway. Mr Chirac appears to believe that, by railing against the commission and labelling “ultra-liberalism” as the new communism, he will demonstrate France's political prowess in Europe and seduce disaffected left-leaning voters into the yes camp. Equally Mr Blair labours under the delusion that he can talk British voters into backing the constitution by stressing the “red lines” he has protected from unwanted incursions by Brussels and claiming that he is winning the argument in Europe.

What both may find is that, by seeming to demonise the commission and the EU, they may persuade voters not to say yes but to junk the constitution. And if even the heads of government who negotiated the text have so little positive to say about it, who is to say they would be wrong to do so?

Editorial looks at the results of the Spring Economic European Council and argues that the EU agenda is being hijacked by worries over the forthcoming referendums on the EU Constitution.