A New Age for Europe or the Old Story?

It should be a time for celebration. The Lisbon Treaty has come into force, a new European Commission has been convincingly approved by the Parliament, the European Council has a permanent president and a European foreign policy structure has been created.

Yet it feels as if Europe’s clock has been turned back ten years, to the year 2000:

• The Barroso II Commission is voted into office just as the EU economy is struggling to recover from an even deeper recession than hit Europe early in the last decade.
• Today’s eurozone crisis echoes the currency tensions of 2000, when the markets challenged the credibility of the euro and forced its value down to $0.90 (It’s $1.35 today).
• Europe’s influence as a global player is in doubt now as it was then, and trans-Atlantic relations seem to be weakening.

Prospects do not look bright on the 2010 economic front. Fourth quarter growth for 2009 in the eurozone and in the UK was up by a measly 0.1 per cent, but down by 0.8 per cent in Greece, which desperately needs an expanding economy, and with continuing recession in Spain, Italy, Latvia and Rumania. The new Strategy for Growth and Jobs discussed at the informal European Council will no doubt be full of good intentions. “The European Council wants to take the lead in the economic strategy” says Van Rompuy. How, I wonder?

As for the Greek crisis, further detail is to be announced by finance ministers on Tuesday February 16 on the basis of the compromise struck at the February 11 informal European Council.

The markets were looking for a binding commitment to bail out Greece, but had to be satisfied with a political statement which imposes tough demands on the Greek government, provides for joint monitoring by the ECB, the European Commission and the International Monetary Fund and promises to take “determined and co-ordinated action” if needed to safeguard financial stability in the euro area.

Greek prime minister George Papandreou was apparently not amused at the hostile tone of his euro partners, accusing them of creating a “psychology of looming collapse” and telling his cabinet that the Commission was to blame for the crisis, given its failure to discipline the previous government for false statistics.

Everyone is stressing that Greece has not asked its eurozone partners for funding, so there’s no bail-out, although a eurozone guarantee for Greek bonds seems the likely option if Greek fund-raising is under threat later this spring.

EU-US relations have taken a bashing over recent weeks, not so much because President Obama refused an invitation to visit Spain in May, as that he announced a surprise package of measures to rein in banking practices in the wake of the Democrats’ electoral defeat in Massachusetts.

This announcement came as a shock to EU policy-makers. It was a major policy aim of the last Commission to develop close relations with the United States on financial services regulation, while an agreed policy approach was a key feature of the G-20 negotiations in the wake of the global banking crisis. All this has been blown out of the water by the new Obama unilateralism. As with climate change, it is far worse to be ignored than to be challenged!

To muddy trans-Atlantic relations further, the European Parliament has just used its new powers to strike down the proposed temporary deal on banking data transfer to the United States negotiated by the European Commission. We could be in for a difficult year on the external relations front, not helped by the reported delays in creating the European External Action Service.