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Europe’s new iron curtain

23 November 2012

10:39 AM

23 November 2012

10:39 AM

The last 24 hours have yielded no agreement in Europe, and they have seen David Cameron’s ambitions decline (he appears resigned to the fact that EU spending will not be limited to 886bn euros, his original objective); but they have also demonstrated that Britain is far from alone at the diplomatic table. David Cameron has been able to forge pragmatic alliances and exert diplomatic pressure precisely. For example, his latest tactic at the budget discussions is to appeal to the downtrodden nations of southern Europe by insisting that the EU’s bureaucracy take its own medicine by raising retirement age and cutting jobs and reducing the final salary pension cap. The EU says that such changes would be ‘legally difficult’; the British government retorts that these proposals are not dramatic and that most European governments have already implemented them.

Cameron is not afraid to antagonise; indeed, he can see that much is to be gained by confrontation. Jose Manuel Barosso is said to have responded to Cameron’s administrative proposals defensively, while President Van Rompuy reportedly met them with silence. The result is that the EU’s leadership looks conceited and cloistered. This impression was compounded when the UK published details of Eurocrats’ salaries, housing allowances and various other perks, a move that the Guardian says has prompted ‘anger’ among Brussels’ cosseted technocrats. The British government is able to take this provocative line because it has some support among member states – the Danes, the Swedes, the Dutch and the Portuguese are believed to be unhappy with, to varying degrees and for different reasons, Van Rompuy’s latest proposal to impose a ‘payment ceiling’ of 940bn euros.

The challenge, though, is to build sufficiently cohesive coalitions across the various theatres of the budget in order to force the EU into a general retreat; but this appears to be impossible. For example, there seems to be room for manoeuvre with Germany over cuts to the CAP. On the other hand, reports that the French and Italians are open to further savings in the EU budget so long as the CAP remains untouched and the rebate system is reformed so that Britain, Germany, Sweden and the Netherlands contribute what the writers call ‘leurs propres contributions’. It’s worth pointing out that these proposed changes to the rebate system are also part of the new Van Rompuy plan, deemed ‘unacceptable’ by some of the countries listed above.

The Sun, though, has a different line. It reports that Francois Hollande will support David Cameron’s budget freeze if payments to the CAP are increased. The Sun reckons that such a move will also increase the size of the British rebate. This might be attractive to Cameron, especially as the rebate is expected to fall over the course of the next few years as more money is diverted to ‘new Europe’.

‘New’ Europe seems to be Cameron’s stumbling block at these negotiations. If you read the French press this morning, you will reach the conclusion that the Poles are leading ‘new’ Europe at this meeting, setting out red lines against certain negotiating positions. This has severely limited Cameron’s options: no concerted attempt appears to have yet been made to reform EU cohension funds or the CAP, which between them account for 2/3rds of EU spending. Therefore, in addition to trimming the administrative budget, Cameron has sought a reduction in infrastructure projects, the so-called ‘Connecting Europe’ growth scheme. He has had some success: convincing Van Rompuy to make a 4.5bn euro cut: but this is some way short of the objective of a 20bn euro cut. I’m told that further reductions to the ‘Connecting Europe’ scheme are unlikely due to opposition from Eastern European countries as well as from what might be termed the Keynesian lobby at Brussels.

None of this will come as a surprise if you saw the Polish Foreign Minister’s piece in Guardian earlier this week, which warned Cameron against cuts to growth and cohesion funds. He said that EU schemes, which amount to 52 per cent of the investment in Poland, represent ‘our very own “Marshall Plan”… to right the wrong we suffered at the 1945 Yalta Conference’. His emotional blackmail did not end there: he added a thinly veiled threat about these negotiations being a ‘test’ of Britain and Poland’s friendship.

The differences between old and new, east and west, are not insurmountable (and, indeed, they are not purely geographical because Francois Hollande, for instance, has lent his support to those nations in receipt of EU cohension funds who also favour substantial growth investment, not all of which lie to the east of the Oder); but they are significant nonetheless. Perhaps this explains why the European press (and indeed Europe’s political class) is pretty unanimous this morning in its view that agreement is unlikely to be reached, no matter how far the talks reach into the night.

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