The future of the EU after the Irish ‘No’

1. How does the future of the EU after the Irish ‘No’ look like?

 

The debate in Spain about the conclusions of the European Council of December 2008 on the fate of the Lisbon Treaty was quite predictable. After the summit, the Spanish government defended domestically the solution that had been agreed with Ireland – basically, to keep one Commissioner per member state and to clarify formal guarantees about Irish neutrality, corporate taxation and family law –, on the grounds that this allows Dublin to call for a second referendum before October 31 2009 and, therefore, to complete the ratification process. The socialist Prime Minister, José Luis Rodríguez Zapatero, admitted in the Spanish Parliament that he preferred a smaller and “genuinely supranational” Commission but, realistically, some deal with Ireland was needed. On the other hand, he stressed that the compromise reached among the 27 member states also included a very important provision for Spain; specifically, that the delay in the process of ratification would not impede the increase in the number of Spanish MEPs according to the Lisbon Treaty. Thus, although Spanish electors will elect only 50 representatives to the European Parliament in the forthcoming June 2009 elections – as regulated in the Nice Treaty – four additional seats will be conferred to Spain once the Reform Treaty comes into force.[1]

The future size of the Commission was lightly criticised by the main opposition party. Thus, the leader of the conservative Popular Party – Mariano Rajoy – said in the Spanish Parliament that he was somewhat worried since a single country, whose population represents less than 1 percent of the total EU, had been able to re-shape the entire governance of the Union, probably worsening the future effectiveness of the Commission. Notwithstanding this, and “just in order to avoid institutional paralysis”, the PP accepted the agreement as well. The Lisbon Treaty – said Mr. Rajoy – is better, even with these cutbacks, than the current failure to make progress in the EU.[2] It is interesting to note that, despite this “paralysis“ and despite the fact that the Nice Treaty – which increased Spain’s weight in the Council to a very similar level to the four largest member states – was successfully negotiated by the former Prime Minister and former PP leader José María Aznar, the Spanish conservatives have not taken the opportunity of the Irish ‘No’ to remark on the institutional advantages for Spain of the Nice institutional framework. They did not do so either during the ‘reflection period’ that followed the failure of the Constitutional Treaty in 2005, since the PP has always officially supported the reform and asked its electors to vote ‘Yes’ in the referendum that was held in February 2005. However, it is true that some voices within the PP – and, perhaps, within the government – suggest that Nice institutions are not so terrible and that, in particular, Spain can live comfortably with 27 votes at the EU Council – and only 50 MEPs – instead of with the double majority voting system – and four additional deputies.

Nevertheless, most Spanish people and the political elites are unambiguous supporters of the Reform Treaty and, therefore, the postponement of its entry into force is considered damaging to Spain’s national interests. However, the truth is that a little additional period of uncertainty, at least, until January 2010 may be welcomed by the officials who are preparing the Spanish EU Presidency during the first semester of the next year, since the maintenance of the current institutional architecture would help to: (i) ease the organisation and smooth functioning of a ‘traditional’ rotating Presidency; and (ii) ensure the visibility of the Spanish Prime Minister in the European Council and important bilateral summits to be held during the semester – such as the EU-US –, in the absence of the new Lisbon figures: the permanent President of the European Council and the reinforced High Representative, whose precise roles, means and status have not been specified.[3]

On the other hand, a second ‘No’ in Ireland or a failure in the Czech Republic to complete the ratification this year – because of the lack of a majority in the Senate, a negative ruling on the Treaty if it is again side-tracked to the Constitutional Court, or a refusal of President Vaclav Klaus to sign the instrument of ratification – might cause many headaches during the Presidency if the EU looks to Spain in search of ideas to deal with this scenery of institutional crisis. Spanish officials have already stated that, if this is the case, the first semester of 2010 would be perhaps too premature to launch any ‘Plan C’ initiative.[4] But, even considering that ratification continues to be surrounded by great uncertainty and that it is therefore difficult to foresee the institutional agenda of the Spanish Presidency, it is indeed quite feasible that the Treaty should come into force in late 2009 or early 2010. Depending on the exact date, this may affect the Spain’s task to implement or not the new institutional instruments included in Lisbon. In any case, what is already clear also is that some obligations will not be fulfilled at all; for example, in the external and defence fields, where some novelties such as the EU External Action Service will need some time before they can become fully operational. Also linked to the new Treaty provisions, but rather affecting the Spanish parliament, is the definition this year of the new procedure for the reinforced input of the two-chamber Cortes – and, probably, the 17 regional parliaments as well – in the EU’s legislative process through the so-called early warning system.

Furthermore, Spanish officials devoted to EU affairs will not only have to prepare during 2009 the six-month rotating Council Presidency but also the 18-month Team Council Presidency with Belgium and Hungary. The S-B-H Trio wants to be the real first one to have a common agenda which started to be defined in Madrid last September 2008 according to the following five priorities:

(1)   Lisbon Strategy.

(2)   New EU policies: global climate change, energy security, migration and innovation triangle.

(3)   Budget reform for the next financial perspectives.

(4)   Institutional reforms (and Stockholm Programme in particular).

(5)   Widening (West Balkan integration and European Neighbourhood Policy reform).

The upcoming European Parliament elections in June 2009 are considered in Spain, as elsewhere in Europe, a domestic political event rather than a real European electoral process. Although this is a general feature of all EP elections, it is especially true this year, considering the political weakness of Prime Minister Zapatero in a scenario of deep economic crisis and the fact that his government does not enjoy a majority in parliament and is not backed by any other party other than its own. Thus, heads of lists in the main candidatures are important politicians but not specifically experts on EU matters. Their previous political experience has more to do with internal and not particularly European topics: a former Justice Minister in the case of the Socialist Party, a former Interior Minister in the case of the Popular Party and an economist specialised in Catalan regional infrastructures in the case of the most important peripheral nationalist coalition.

Regarding the formation of the new Commission in autumn 2009, José Manuel Barroso and his Commissioners are generally perceived in Spain as a competent team with a correct leader. The overall assessment of both politics and policy outputs is positive. First, and looking to politics, this Commission has been able to regain its credibility after the controversial Prodi Commission, established good relations with the Council and the European Parliament, and functioned smoothly, which is not an easy task in a Europe of 27 Member States. As concerns to policies, three important achievements should be mentioned from Spain’s point of view:

a)     The final outcome of the Financial Perspectives 2007-2013, in which the Commission defended Europe’s common interests with an acceptable degree of success.

b)    The basis for a common European policy on Migration, one of the most important priorities on the Spanish government’s internal and external agenda.

c)     The target of cutting greenhouse gas emissions by 20%, produce 20% of its energy from renewable energies and increase efficiency by 20% (the so-called “20/20/20 by 2020”) was highly appreciated in Spain, which supports an EU common energy strategy despite its poor performance in greenhouse gases emissions.

If, as it is foreseen, the European People’s Party gets a majority of seats in the next EP elections, the Spanish government and even socialist MEPs would be willing to back him for a second term. It is difficult to state who will be the next Commissioner from Spain, since it is not yet known if the next Commission will have 27 members or less. In principle, Joaquín Almunia – member of the governing Socialist Party –, who is responsible for the key portfolio of Economic and Monetary affairs, should continue since his track record is impeccable: highly skilled, with a truly European view and very well connected with the President of the Commission. In the event of the Lisbon Treaty finally being ratified by all member states and the post of CFSP High Representative becomes part of the Commission, then Spain would probably prefer to preserve this position and then Javier Solana would be the Spanish Commissioner as High Representative. However, it is also said that Solana, who is also a member of the Socialist party, is somewhat tired and, nevertheless, it will be difficult for Spain to retain the position of High Representative for a new appointment. In any case, it should be underlined that Spain (with or without Treaty into force) will probably ‘lose’ one of its two key institutional positions in the EU machinery after autumn 2009.

2. Transatlantic relations renewed after President Bush: top priorities

 

Spanish priorities for a re-definition or re-vitalisation of transatlantic relations

According to the Spanish preponderant view, the three top priorities for a re-definition or re-vitalisation of the transatlantic and EU-US relationship would be:

a)     An effective and co-ordinated management of the global financial crisis.

b)    New approach to security and peace-building complementing military action with soft power tools in order to deal with new conflicts and their causes. In this context, Spain believes that the ‘Alliance of Civilizations’, proposed to the UN by Prime Minister Zapatero in 2005, could be a relevant instrument to defeat violence.

c)     A new US approach to efficient multilateralism beyond security affairs, especially with respect to the fight against climate change, the international law and cooperation in the fields of education, research and development.

Considering specifically the relationship between Spain and the US[5], we have to bear in mind that, during the Bush years, relations oscillated from warm (thanks to the unconditional support of the former conservative Prime Minister Aznar to the Iraq invasion) to cold (because of the withdrawal of Spanish troops from Iraq when the socialist Prime Minister Zapatero was appointed in 2004). Nevertheless, Spain and the United States have maintained good relations during the last four years in defence, counter-terrorism, police and judicial cooperation and within NATO. In the economic realm, the situation is also very fluid particularly with regard to mutual foreign direct investment (FDI).

Nevertheless, the Spanish government is currently trying to reinvigorate and improve relations with the US. Taking into account the perspective of the Spanish EU Presidency during the first semester of 2010, transatlantic relations have been defined by Prime Minister Zapatero as “a priority task” for the Spain during its Presidency.[6] In this vein, the government is now defining a new agenda for relations with the Obama administration.[7] The Spanish government wants to reinvigorate the framework of the European Union to face international challenges such as the Iranian nuclear programme, the Israel-Palestinian conflict, or the relations with Russia. Other important issues, such as UN reform, post-Kyoto agreement (Copenhagen), the fight against poverty, or the reinforcement of the EU-US coordination toward Latin-America may be also included in the renewed Transatlantic Agenda that can be agreed by the EU-US summit to be held next 2010.[8]

It is true that a renewed partnership may be difficult to convert into tangible realities, and the EU – and particularly Spain – will find several difficulties in meeting US demands, for example with regard to troop deployments in Afghanistan. However, there are also many reasons to believe that the horizon looks bright for the transatlantic relations; not only for the EU in general but also for Spain in particular. Obama’s priority to revive the economy and reform its regulatory framework, along with his pledge to achieve energy independence and rebuild the country’s failing infrastructure, bodes well for Spain. Not only might Spain share the lessons of the regulatory experience that has kept its banks from collapsing, it might also – as one of the worlds leaders in the renewable energy sector – offer to create an energy independence alliance with the United States. Spain’s construction companies – also world leaders in their own right, but now feeling the effects of a whopping hangover from their own bubble – would be willing and able to lend a hand in the rebuilding of U.S. infrastructure. Finally, Obama’s proposal to create a new Partnership for Energy Security in the Western Hemisphere, and to send an Energy Corps of young engineers into Latin America, offers Zapatero the opportunity to suggest some tangible content for the kind of productive U.S.-Spanish collaboration in Latin America that Bush and former Prime Minister José María Aznar used to only dream about.[9]

3. Financial crisis and challenges of global governance: the EU response

 

Financial crisis and challenges of global governance

The global financial crisis that has pushed the EU, and particularly Spain, to economic recession during the second half of 2008 has demonstrated, more than ever, the deep interdependence that exists in Europe and the world. Spanish economists, like most international analysts, do not question any longer the fact that we are facing the greatest international financial crisis since the Great Depression.[10] Since September 2008, the world has seen unprecedented events that are re-shaping the international financial system and challenging liberal economic orthodoxy. Now, governments are launching rescue packages – first for specific financial institutions and then for the banking system as a whole although the Spanish financial sector had remained relatively safe from the turmoil in the markets, thanks to the policies enforced by the Bank of Spain. Central banks, including the ECB, have also opened up new channels for increasing a liquidity that still is lacking. And, what initially appeared to be a liquidity problem is also turning out to be a solvency problem that requires a hefty recapitalisation of the banking system in advanced countries. Fiscal stimulus packages have also been launched and, finally, and above all, decision makers and experts consider now necessary to improve regulation of the financial sector. In this context, the expectations towards the EU in Spain are ambiguous, since the performance of the ECB or the Commission has been perceived as technically correct (despite being less ambitious than the US response) but the real problem of the EU continues to be the difficulty to act with real political will and to generate the leadership that are indeed needed at times like these for restoring confidence to the markets. Although it is difficult to forge and consolidate strong political leadership at a time of crisis – and this is particularly true in Europe, where the Lisbon Treaty is not even into force after nearly a decade of institutional debate – there is no other recourse. In the face of panic, technical solutions are not enough to restore market confidence. For this reason, leadership can only be shared and must be based on cooperation among states. All in all, as of mid-autumn, the leadership emerging from Europe and concerted government action restored some degree of confidence. But capital continued to flee towards safer assets, the inter-bank market still had problems and the structural causes of the crisis had not been resolved.

Notwithstanding all this, the crisis will serve as well as an opportunity for the EU in general and for the Euro in particular as a global reserve currency. First, because it can be expected that the new international financial architecture that emerges after the crisis will have a greater similarity to that of continental Europe than to the Anglo-Saxon model. This will provide an opportunity for the Union to take on greater global leadership, if it is capable of speaking with one voice on the world stage. Secondly, because the crisis gives the Euro a chance to gain ground against the US dollar as an international reserve currency, a change which needs the political-institutional structure of the Eurozone to be sufficiently solid. All in all, the crisis marks an opportunity for the EU if it is capable of using the current, difficult situation to strengthen itself and improve its internal economic governance.[11] In this context, there is an open discussion in Spain as some analysts suggest that the performance of the EU would improve significantly by changing some aspects of the economic institutional governance in the EU[12] and a single European Treasury has even been suggested.[13]

Indeed, the crisis will have major geopolitical consequences, which are difficult to predict. Nevertheless, this might accelerate reforms of institutions of global governance and make clear the need to strengthen the forums for multilateral cooperation beyond Brussels or the G7/G8, being probably the G20 the better arena for co-ordinating the international response. This means significant shift in the international power constellation – since now emerging powers such as China, India, or Brazil are included in the new global decision making. The Spanish government, which is not a member of the Group despite being the 8th-11th world economy[14], re-acted to be invited to the international financial summit organised by George Bush in Washington last November 2008 in which initially only members of the group G20 could participate. Spain did intense lobbying to be invited to this crucial summit and, again, to the following one to be held in London in April 2009. Whereas it may be understandable that Spain is not part of the G8, it is arguable that Spain is not part of the G20 while much less rich countries such as Argentina, Indonesia, South Africa, or Turkey are. Spain finally was invited, thanks to the support of the French President Sarkozy, who left to the Prime Minister Zapatero one of his two chairs – one for France as such and the other for being the rotating EU Presidency – at the summit. However, Spain is not yet a formal member of the G20 but is doing a diplomatic effort which should conclude in the official admission of Spain and the subsequent enlargement of the G20.

 

 

 

[1] See the address by the PM Rodríguez Zapatero in the Parliamentary Journal of Debates (Diario de Sesiones del Congreso, IX Legislatura), 53rd Plenary Session, 18 December, 2008, Spanish Congress, available at: www.congreso.es/portal/page/portal/Congreso/PopUpCGI?CMD=VERLST&BASE=puw9&DOCS=1-1&FMT=PUWTXDTS.fmt&QUERY=%28CDP200812180056.CODI.%29#(Página4) (last access: 30 March 2009).
[2] See the address by the opposition leader Mariano Rajoy in the Parliamentary Journal of Debates (Diario de Sesiones del Congreso, IX Legislatura), 53rd Plenary Session, 18 December, 2008, Spanish Congress, available at: www.congreso.es/portal/page/portal/Congreso/PopUpCGI?CMD=VERLST&BASE=puw9&DOCS=1-1&FMT=PUWTXDTS.fmt&QUERY=%28CDP200812180056.CODI.%29#(Página8) (last access: 30 March 2009).
[3] As it has been underlined (see Attila Agg, 2009, “Global Crisis Management and EU Team Presidencies: European Institutions at the Crossroads”, paper presented at the seminar “A Common Program for the 2010-11 Team EU Presidency”, Madrid, Elcano Royal Institute): “the decapitation of the rotating presidencies with the ’unemployed’ prime ministers can create tensions between the EU bodies and the nation states concerned, first in Spain. Given the delay of the ratification process both problems could have been treated but no special effort can be noticed in this direction. No doubt that the separation of the General Affairs Council and the External Relations Council can solve some problems, since the GAC may provide a job for the prime ministers concerned and with an open coalition-building role can solve some coordination problems among the member states. Most likely that the ERC will be the area of big power contestation in the field of the classical foreign policy and security as well as in the EU foreign policy beyond Europe“. To be sure, the division of the Foreign Affairs from the General Affairs Council could become very sensitive given the implications for the internal organisation of national executives, including the Spanish one.
[4] Nevertheless, in case of a new failure in the ratification process, some Spanish officials and analysts start to advance their support to an institutional reform oriented towards differentiated integration, without need of unanimity to go further. Even if the Lisbon Treaty completes the ratification, a multi-speed Europe – perhaps through the effective launching of the enhanced co-operations included in the Treaty – seems to be also unavoidable in a heterogeneous EU of, at least, 27 members. See Carlos Closa, 2008, After Ireland: Referendum and Unanimity (Elcano Royal Institute ARI 62/2008), available at: www.realinstitutoelcano.org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Zonas_in/Europe/ARI62-2008 (last access: 30 March 2009).
[5] See Alicia Sorroza and David García Cantalapiedra, 2008, “Spain“, in: Transatlantic Relations 2009 European Expectations for the Post-Bush Era, ed. by Jan Techau and Alexander Skiba. EPIN Working Paper No. 20 / November 2008, available at: http://shop.ceps.eu/downfree.php?item_id=1754 (last access: 30 March 2009).
[6] See address by the Prime Minister Rodríguez Zapatero on the priorities of the 2010 Spanish EU Presidency on 12 February 2009 organised by the Asociación de Periodistas Europeos, available at: www.la-moncloa.es/Presidente/Intervenciones/Discursos/prdi20090212.htm (last access: 30 March 2009).
[7] It is remarkable that 90% of Spaniards have a positive opinion of Obama’s election. Moreover, 70% believe there will be significant changes in US foreign policy and 70% also believe Obama’s election will be beneficial for Spain. See 19th wave of the Barometer of the Elcano Royal Institute (December 2008), available at: www.realinstitutoelcano.org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Barometer/Barometer19 (last access: 30 March 2009).
[8] See Alicia Sorroza and David García Cantalapiedra, 2008 (ibidem).
[9] See “Don’t ignore European economic powerhouse”, Paul Isbell, The Miami Herald, November 11, 2008.
[10] See Federico Steinberg, 2008, The Global Financial Crisis: Causes and Political Response (Elcano Royal Institute ARI, 126/2008), available at: www.realinstitutoelcano.org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Zonas_in/International+Economy/ARI126-2008 (last access: 30 March 2009).
[11] See Federico Steinberg, 2008 (ibidem).
[12] See Carlos Mulas, 2009, Improving Economic Governance in the EU (Elcano Royal Institute ARI, 12/2009), available at: www.realinstitutoelcano.org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Zonas_in/Europe/ARI12-2009 (last access: 30 March 2009).
[13] See Juan I. Crespo, 2009, A Tool for the Economic Crisis: A Single European Treasury (Elcano Royal Institute ARI 31/2009), available at: www.realinstitutoelcano.org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Zonas_in/ARI31-2009 (last access: 30 March 2009).
[14] It depends on measuring the Gross Domestic Product nominally (and, thus, Spain would be the 8th biggest economy of the world) or measuring the GDP derived from purchasing power parity (PPP) calculations, in which Spain places 11th.