EU DIARY:AFTER YEARS of discord – not least in Ireland – the Lisbon Treaty finally enters into legal force today. If a ceremony in the Portuguese capital tonight marks something of a rite of passage for the EU, it also brings prolonged institutional debate to an end, writes ARTHUR BEESLEY
The rulebook has been reset, the personnel chosen. The overriding priority now is to find a way out of the economic crisis, the single biggest issue confronting the bloc.
No matter how controversial the choice of Herman Van Rompuy and Catherine Ashton proved to be, they will be charged with driving forward the EU’s work alongside commission president José Manuel Barroso.
Although Barroso has assigned portfolios to his incoming team, the new EU executive cannot start work until it is ratified by the European Parliament.
Yet there is no time to lose. A renewed upsurge of stock market turmoil on the back of a debt default by Dubai World, a company owned by the gulf emirate of Dubai, illustrates the extent to which the global economy remains very prone to shock.
The significance of the latest volatility is that it surrounds concern that Dubai may be but the first state to default on sovereign or quasi-sovereign debt.
The EU is not immune to such fears, with Greece and Latvia already paying more for their debt as a direct result of events in Dubai.
Indeed, Greek vulnerability is underlined in (admittedly speculative) reports which suggest the EU would not intervene to support the country in the event of default.
Although the union at large is projected to be on a path towards a gradual turnaround, Brian Lenihan’s budget difficulties show just how painful a process that will be. Now Dubai’s troubles have opened up a new phase in the crisis.
In a hothouse atmosphere of fear and worry in financial markets, this has clear potential to slow down the recovery or derail it altogether.
Barroso has signalled that he will prioritise the economy when the new commission takes office, most likely at the end of January.
Last week he published a consultation report on the parameters of the “EU-2020 Strategy”, a document that left no doubt about the scale of the challenge the union faces.
“The worst economic and financial crisis in decades has hit Europe hard with a sharp economic contraction. The unemployment rate is set to rise to double-digit figures in 2010, a level not seen for a decade,” it said.
“Collective action to save the financial system and to boost demand and confidence through public intervention has helped to prevent an economic meltdown. However, the crisis has weakened our resilience . . . The efforts of a decade which resulted in a reduction of unemployment from 12 per cent to 7 per cent in the EU risk being undone by the crisis.” Casting this mightily difficult enterprise in a positive light, the document said the crisis should be “the point of entry into a new sustainable social market economy, a smarter, greener economy, where our prosperity will come from innovation and from using resources better”.
All very well on the vision front you might think – and not too far from Dublin’s long-term strategy to recalibrate the Irish economy. But the immediate problems leave little room for wide-angle philosophising. On several fronts, the challenges are acute.
In an opinion piece yesterday in French newspaper Le Monde, for example, outgoing economic and monetary affairs commissioner Joaquín Almunia highlighted the problem of mounting public debt.
Almunia, who assumes control of the EU’s competition division in the new commission, warned that strong, sustainable and balanced growth could not be achieved without stopping the debt spiral. “The choice we are faced with is the following: regain control of the budget or become debt slaves.”
There is more. How will EU governments unwind extraordinary state support to the banking sector? How can the potential of the recovery be maximised while curtailing the riskiest activities in the financial sector? How can the bloc’s internal market – one of its greatest achievements and a motor of growth in good times – be preserved in the face of protectionist impulses to set aside the normal trading rules? These are immediate challenges. Others are looming in the medium term. By 2020, for example, a quarter of the EU population will be over 65. Even in times of plenty, recasting economic systems to take account of that would be hugely difficult.
For all that, Barroso embarks on his second term a strengthened figure. Comfortable in the Brussels bureaucracy, he is unburdened by the difficulty of negotiating institutional reform and no longer strained by the task of bedding down the 2004 enlargement. In short, he is free to concentrate on his primary project.
Whether the new arrangements in the Lisbon Treaty help this work in a meaningful way will be the biggest test of the reforms. It is a mammoth task.