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1998 In Review: Can EU Put Its Own House in Order?

Prague, 14 December 1998 (RFE/RL) -- This year, like in the two previous ones, the European Union (EU) has failed to overcome the divisions among its 15 member states over basic reforms generally considered essential to expansion into Central and Eastern Europe.

Rather, the EU's attention focused on the launch of the euro, its new single currency. The euro's birth on January 1 will culminate the Economic and Monetary Union the EU created eight years before.

But 1998 did see a few attempts to grapple with the budgetary and institutional problems which must be resolved before expansion can begin, albeit with only limited success.

EU Agriculture Commissioner Franz Fischler (of Austria) twice tried to persuade the EU's farm ministers to consider serious changes in the Union's Common Agricultural Program (CAP), which eats up close to half of its annual $100 billion budget.

Both attempts failed because countries such as France --which receives one-quarter of the CAP's subsidies-- and Spain and Ireland --which also benefit from large subsidies-- refused to consider any major revisions in the program. And yet, it would clearly be difficult, if not impossible, for the EU to take in Eastern agriculture-intensive nations without drastically revising the CAP.

The problem of reforming the EU's so-called structural funding to its poorer member states --such as Spain, Portugal, Greece and Ireland-- got even less consideration during 1998. Most members receiving structural funds, which account for 20 percent of the EU budget, oppose any substantial reductions in their subsidies. Most --perhaps all-- of the Eastern candidate states would be eligible for extensive structural funding under the present rules, and they are not likely to get it without reform.

All these issues directly concern the EU budget. They were the subject last year (July 1997) of the EU's Executive Commission recommendations in its "Agenda 2000" document on the EU's coming 2000 to 2006 budgetary period. The Commission called there for radical reforms of both the CAP and structural funding. It said that only fundamental changes in both programs would allow the Union to take in 11 new members --the 10 Eastern candidates plus Cyprus-- without exceeding the current 15 member states' prohibition of any budgetary rise beyond inflation in the six-year period.

There is also another budgetary issue, not touched on in Agenda 2000 but closely involved with the question of who will pay for the EU's eventual enlargement.

The new German Government has renewed its conservative predecessor's call for a reduction in the country's net contribution to the Union. Chancellor Gerhard Schroeder, like Helmut Kohl before him, says that Germany can no longer afford to pay in some $12 billion a year in net contributions to the EU. Other large net contributors, such as the Netherlands, also want their payments reduced, while Britain, which was given a $2 billion annual rebate 14 years ago, insists it will not give that up. If none of these countries give way, who will finance expansion?

At the Vienna summit this month (Dec. 11-12), divisions among EU member states over budgetary issues were so great that the assembled heads of state and government were unable to pay more than passing attention to Agenda 2000.

Spain, Portugal and Greece made it clear they would not allow any reductions in the structural funds they receive. The Netherlands, Austria and, above all, Germany --which takes over the EU six-month presidency on January 1-- reaffirmed their determination to reduce their net contributions, proportionately the highest in the Union.

As if the budgetary quandaries were not enough, the EU must also undertake important institutional reforms before expansion can begin. One of them concerns the size of the European Commission, which today has 20 commissioners, with two from its five largest states --Britain, France, Germany, Italy and Spain-- and one each from the other 10 members. No-one believes that this already cumbersome system could function in an EU enlarged to 26 nations.

Another sorely needed institutional reform concerns voting by member states. This is perhaps the most sensitive issue of all, consisting of two components: so-called voting weights among bigger and smaller member states, and the areas designated as subject to majority rather than consensual voting. A proposal currently under discussion would increase the greater number of votes larger members get today in return for their agreement to reduce the number of commissioners to one for each member state, big or small.

There is also a need for more majority voting. The question has been posed many times: if it is often impossible today to attain consensus among 15 members, how difficult would it be to attain unanimity from 26 nations on, say, common security- and foreign-policy issues? Few doubt that, without an expansion of majority voting, enlargement would bring paralysis.

The EU has promised to address itself to those questions in the coming year. A special summit has been scheduled for the end of March, during Germany's coming presidency, to reach agreement on Agenda 2000's main budgetary issues. Some EU leaders have said the March summit will wrap the matter up, but others have suggested that full accord won't come until the end-of-the-presidency regular summit in June.

If the second group is right, it means that the budgetary problems may still be outstanding when elections for the EU's Parliament are held in June --a conjunction Brussels had hoped to avoid.

In any case, the EU has until the end of 1999 to approve its budget for the following six years. A down-to-the-wire negotiation is by no means impossible --it has occurred many times before at the EU.

When French Prime Minister Lionel Jospin visited Prague last month (Nov. 18), he was asked why he had said that the year 2003 was, (in his words) "realistically speaking," the earliest possible time for beginning EU expansion to the East. Jospin replied that it would take at least that long for the Union to effect its internal reforms --in his phrase, "to get our house in order."

That suggests the EU may be in for a four-year house-cleaning before serious attention is paid to the Eastern candidates' accession.

(Second of three articles on the European Union.)