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The Year in Review- Crisis and Consolidation for the European Union

By Yeo Lay Hwee, Director, EU Centre

Crisis and Recovery

2009 ended on a mixed note for the European Union (EU).

The year started with much gloom and doom, with European economies succumbing to the financial tsunami unleashed by the sub-prime crisis originating from the United States. Many EU member states were particularly hard hit by the credit crunch and liquidity crisis because of home-grown housing bubbles while some suffered from large public debts and current account deficits. There was also an unprecedented collapse in trade triggered by falling wealth and demand and greater uncertainty. Estimates by IMF in May predicted that output growth in advanced Europe would contract 4% in 2009 and that of emerging Europe by 4.9%.1

Actions by individual member states, coordinated responses in the European Union (EU) plus global efforts through the G20 helped to prevent a Great Depression. And by the 3rd quarter of 2009, green shoots of recovery were emerging in the global economy. EU economy has also emerged from recession and there are signs of improvement in the overall economic situation.

There were also some bright spots on the trade front despite the difficulties in the WTO’s Doha Round negotiations. The EU has just signed a FTA with South Korea and looks set to start negotiations for an FTA with Singapore in 2010. Negotiations for a FTA with India and a comprehensive partnership agreement with China have also begun.

A Reform Treaty

Adding cheer to the positive news on the economic front was the final ratification of the Lisbon Treaty by the Irish after a 2nd referendum in Oct 2009. Analysts believed that the economic crisis was one of the factors that have swung the Irish vote in favour of the Lisbon Treaty.

A quiet relief rather than rambunctious celebration greeted the European Union when the Lisbon Treaty entered into force on 1 December 2009 following the ratification by all 27 EU member states. Within the Union and for its citizens, the Treaty is supposed to make the Union more democratic, transparent and efficient. But it is in the area of external relations and external actions that some of the more profound institutional changes are put in place in the hope that the EU will become a more coherent, cohesive and visible actor on world stage.

The Top Dogs?

The Lisbon Treaty created two new positions, the permanent President of the European Council and a High Representative for the Union’s Foreign and Security affairs (HR). The latter combines the roles of the former High Representative of the Common Foreign and Security Policy (CFSP) and the Commissioner for External Relations.

A special summit was held in November to decide on the selection of the candidates for these two top posts. After much speculation and debates, Herman van Rompuy, former Belgian prime minister as the President, and Catherine Ashton, former Trade Commissioner of the Union as the High Representative.

Assessments of the choice of van Rompuy and Ashton as President and HR respectively have been mixed. Sceptics criticised the choice as timid and fear that the appointment of these two who were relatively “unknown” in the international arena would only lead the EU to further decline in the world stage.2 They added that Europe already “has an international image problem that stems in part from a complex institutional structure that non-EU countries find baffling”, and without a “household” name to represent the EU, would only add to the confusing plethora of people currently representing the EU in different international fora. Some critics also lambasted the process involved in the selection of these two candidates seeing it as non-transparent and a result largely determined by the two bigger member states, France and Germany.

Supporters of the EU however believed that both van Rompuy and Ashton are consensus builders and they are well placed to play an important role in bringing about consensus and greater coherence to EU’s external actions through patience and perseverance in working through a complex and unique system that the EU has built up over the years. Van Rompuy, for instance, earned his reputation as a “quiet negotiator” when he was asked to be the Prime Minister of Belgium to heal the deeply divided kingdom while Ashton has impressed many in Brussels in her short stint as the Trade Commissioner for her “quiet diplomacy” and “determination to get things done”. 3

As Daniel Korski puts it, “neither are likely to stop the traffic in Moscow, Beijing or Washington, but their immediate task is not to stop the traffic but to create a traffic system that EU leaders can use to improve their policy cooperation and coordination particularly in the area of foreign and security policy”.4 What then exactly are the roles of the President and the HR?

According to the treaty, the President of the European Council chairs it and drives forward its work. He ensures the preparation and continuity of the work of the European Council in cooperation with the President of the Commission; endeavours to facilitate cohesion and consensus within the European Council and reports to the European Parliament after each of the meetings of the European Council. The President will also share with the HR in representing the Union.

As for the HR, she is expected to exercise, in foreign affairs, the functions which so far were exercised by the six-monthly rotating presidency, the HR of the CFSP and the Commissioner for External Relations. More specifically, she conducts the Union’s common foreign and security policy; presides over the Foreign Affairs Council; ensures the consistency of the Union’s external actions; represents the Union for matters relating to the common and foreign security policy, conduct political dialogue with third parties on the Union’s behalf and expresses the Union’s position in international organisations and conferences; and exercises authority over the European External Action Service (EEAS) and over the Union’s delegations in third countries and at international organisations.

Despite the above, the truth of the matter is that the treaty provisions for this new “institutional architecture” remains quite vague and there are grey zones with regards to the role of the President and the HR, opening up the possibility of turf fights. How will the HR and President relate to the triple rotating presidencies and the President of the Commission, who will support the office of the permanent president, etc, are still not quite clear.

At first glance, the HR may seem to be the “more powerful” since she will be backed by a 6000-strong EEAS make up of officials from the European Commission, the General Secretariat of the Council and seconded staff from the diplomatic services of the member states. Yet, the Treaty gives no clear guidance on the mission and role of the EEAS. This “lack of precision in the treaty’s provisions concerning the EEAS could rapidly lead to confusion and even conflict …”.5 Who from the European Commission will be incorporated into the EEAS and how will seconded diplomats from member states integrate into the EEAS are issues that have to be sorted out.

With all these uncertainties, what can be expected in the year ahead? The EU will continue to be self-absorbed as it tries to resolve the various ambiguities and grey areas to prevent turf fights and frictions. The Treaty of Lisbon creates the conditions for a more effective European presence in the international scene but the contents of the policies remained unclear. A lot will depend on how Herman van Rompuy and Catherine Ashton make of their jobs and roles, and the respect that the member states will show for their roles. In the end, how the EU’s foreign policy and its external representation will shape up rests on the member states. This is because while the Union’s capability to act might be increased by extended flexibility options and operative resources, the decision-making procedures for foreign and security policy remains essentially inter-governmental and emphasis is still on consensus rather than qualified majority voting.

Increased powers to the European Parliament but declining interests?

While the selection of candidates to fill the top posts (because of its external relations implications) generate quite some interest outside the EU, the European Parliament (EP) elections in June 2009 did not create much stir even within Europe. Average voters’ turnout of 43% was the lowest since 1979. The Centre-right parties emerged as the dominant group in the 2009-2014 Parliament taking 265 seats out of 736 seats. This was against the Socialists who won only 184. What is also interesting is that the Centre-right of the five largest EU member states – Germany, France, UK, Italy and Spain – did well.

A worrying sign for some EU observers is the substantial support received by the Far-Right parties. These parties have formed a coalition in the European Parliament called the Europe of Freedom and Democracy group, and essentially, it comprised populist parties strongly opposed to EU integration and immigration policies. This group has 32 MEPs in the present Parliament.6

The constant decline in voters’ turnout (from a high of 63% in 1979) and low level of interest in the European Parliament elections was ironical as the Parliament has over the years been vested with more power with each treaty revisions. In response to the need to address the issue of democratic accountability, the Lisbon Treaty further enhances the power of the directly elected Parliament, placing it almost on equal footing as law-maker with the European Council. This means the EP would have a greater say on an increasing number of EU policies, including the appointment of key personnel. The President of the Commission has to be approved by the EP and the new post of HR for Foreign and Security Affairs must also be subject to the consent of the EP.

Climate Action – Hot Air and Cold Shoulders

2009 ended with a bit of anti-climax on the climate front. For the EU, this was particularly disappointing to say the least, and for critics of the EU, an embarrassment for the bloc. The EU had been at the forefront of international efforts (for various reasons ranging its perception of itself as a normative power to the interests manifested in the close linkage between climate change and energy security) to combat climate change since the 1990s. In the run-up to the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP) 15 meeting in Copenhagen, the EU had played an important role in pushing for a new post-Kyoto climate agreement beyond 2012.7

The EU was also among the very first in the world to come out with a definitive and comprehensive climate change policy to combat global warming and cap the rise of temperature from reaching the dangerous levels of more than 2 degrees above the pre-industrial temperature. In 2008, it further adopted a climate and energy package with a series of proposals for concrete actions and a set of ambitious targets to reduce emission within Europe. The 2020 targets include increasing the share of renewable energy in EU’s total energy consumption to 20%; boosting energy efficiency by 20% and cutting emissions by at least 20% below 1990 levels by 2020.

In the run-up to the Copenhagen summit, EU outlined its key objectives and emphasised that the EU would work to achieve maximum progress towards an ambitious and legal binding global climate treaty to succeed the Kyoto Protocol. EU wanted the agreement in Copenhagen to contain pledges from both developed and developing countries on binding cuts in emission, to have a financial framework ready for dealing with climate change actions and a fast-start financial support to developing countries. EU also puts on the negotiating table pledges to cut emissions by 20% from 1990 levels by 2020 and by 30% if other developed countries followed suit. It also pledged €7.2 billion to the global fast-start climate fund.

Yet all these ended in disarray for the EU. EU which prided itself for taking the lead in advocating climate change action and coming to the Copenhagen conference with the most ambitious pledges was completely sidelined. The eleventh hour deal and the 3-page Copenhagen Accord was hammered out by US, China, Brazil, South Africa and India without EU’s participation.

More damaging for the international community is the blame-game that has begun. European politicians blame China and other developing countries for holding the conference hostage. “Ed Milliband, the British secretary of state for energy and climate change blamed Beijing for the talks’ near collapse”.8 Whether this will have any likely impact on overall EU-China relations is everyone’s guess. But it cannot be entirely ruled out that the failure of the climate conference, coupled with a still weak economic recovery in the EU may provide an excuse for disparate voices within Europe to lobby for environmental regulations to mask protectionist tendencies. There had been talks of carbon tax or sanctions on goods from heavy polluting countries outside the EU. Such talks of establishing trade measures to impose climate change-related costs on imports or implementing border measures against countries that have not introduced measures to combat climate change might lead to trade wars, carrying the risk of undermining the global trading order.

In the weeks to come, the Europeans would be reviewing what went round at the Copenhagen conference. The European Commission has been tasked to come out with a report in time for the next EU Environment ministers meeting in Seville on 15-17 January 2010. Trying to salvage the “failings” of the Copenhagen meeting, German Chancellor Angela Merkel has offered to host a follow-up meeting in mid 2010, a sign that climate change issues would continue to dominate EU politics for some time to come. Also, under the now ratified Lisbon Treaty, the EU will have a common energy policy tied to climate change action, and a new portfolio on Climate Action has been created by President of the Commission, Jose M Barroso. The primary role of the Climate Commissioner to be filled by Connie Hedegaard, former Danish environment minister and the one setting the stage for the Copenhagen climate conference is to prepare negotiations between Brussels and international partners on a whole host of climate related issues.

Conclusion

The European Union’s ability to manage the risks and fallout from the global financial crisis was severely tested in 2008-2009. While the reactions was initially haphazard and hesitant, more coordinated efforts by the euro zone economies helped limit the otherwise widespread carnage that would have been unleashed by the financial tsunami. It was also during this acute crisis that the Irish voted for the Reform Treaty (Lisbon Treaty) paving the way for the Treaty to enter into force on 1 December 2009. It was also a vote for reforms, and some say further integration.

The institutional innovation in the area of foreign and security policy is one of the key highlights of the Treaty. The appointment of Herman van Rompuy as the permanent President of the European Council and Catherine Ashton as the High Representative of the Union’s foreign and security affairs reflected the cautious and low key approach towards change and consolidation. The full contours and impact of the EU’s CFSP would not be seen in 2010 as the merging of the different parts of the Council and Commission into the European External Action Service and the operational consequences would take some time to sort out and take shape. The quest for external influence would continue to be a struggle.

The major disappointment for the EU in 2009 would be in the area of climate change. EU despite its proactive stance on climate change action and ambitious pledges moving forward to the Copenhagen conference could not influence the outcome of the climate summit. The result- a weak political statement with neither binding emission cuts nor clear commitment to the climate fund for tackling climate change.

There is no doubt that climate change would continue to dominate EU’s agenda in 2010 as EU works to salvage its reputation and “recapture” its leadership role. The appointment of Connie Hedegaard as the new Commissioner for Climate Action underlines the importance of this issue. How would the climate change issues interact with the other important agenda of economic recovery and trade? Would the EU in its review of the failings in Copenhagen resort to using trade measures as a bargaining tool to foster a stronger climate agreement much more inclined to its own policy preferences? The trend to look out for is increasing linkages between trade and climate change issues and to avoid the pitfalls of this agenda being hijacked by those anti-free trade and protectionist elements.

[1] Edda Zoli “Europe Battles a Deep Recession” in IMF Survey Magazine, 12 May 2009
[2] Timothy Garton Ash, “Safe choices for a reticent bloc” in Straits Times, 27 November 2009
[3] http://www.eubusiness.com/news-eu/politics-treaty.1on / www.eubusiness.com/news-eu/summit-treaty.1om
[4] Daniel Korski, “Europe’s new leaders”, 20 November 2009 (http://ecfr.eu/content/entry/commentary_korski_eu_high_representative/print)
[5] Graham Avery, “Europe’s foreign service: from design to delivery” in EPC Policy Brief November 2009.
[6] 2009-2014: A centre-right European Parliament, EurActiv.com, 25 June 2009 www.euractiv.com.en/eu-elections/2009-2014-centre-right-european-parliament/article-183383
[7] EU Centre’s Background Brief on “The European Union and Climate Change Action” Link
[8] “Beijing rejects UK claim of hijacking climate talks” International Herald Tribune, 23 December 2009​