The fallout from the French and Dutch votes against the EU Constitution is growing. Small fractures in the union have grown and are visible for the world to see. The recent failed EU summit, chaired by strong EU supporter Jean-Claude Juncker, the Prime Minister of Luxembourg, prompted Mr. Juncker to describe the union as being in "a deep crisis".
What should have been a summit to think about and discuss the demise of the constitution was instead focused on the 2007-2013 EU budget, which has until next year to be worked out. Mr. Chirac, handed a huge personal defeat during the constitution voting, looked not to heal the European divide his government partially caused but to shift blame elsewhere. There are two conflicting economic systems competing for primacy in the EU: the United Kingdom, with an economic model closer to American capitalist standards of competition, and the current Franco-German socialist model. The philosophies are so different that it is extremely difficult to build an EU budget and formulate policy among the 25 member nations, that have widely different views of the world and economics. Winning the heart of this debate in favor of the United Kingdom model is vital to Europe's future prosperity and security. Mr. Chirac coldly attacked the British rebate in the EU, a deal that Margaret Thatcher cut with a smaller EU in 1984. The British rebate compensates the UK for its disproportionate payments into the EU budget and grows annually. The rebate is expected to be about 4.5 billion euros ($5.5 billion) this year.
Mr. Chirac's attack was clever on several fronts. There is no love lost between Mr. Chirac and Mr. Blair, who have clashed on issues regarding the leadership of Europe and, more noticeably, the Iraq war, where France effectively blocked UN support for the war against a strong British desire. PM Blair was not willing to give up or renegotiate the rebate unless the French were willing to revise their own generous subsidy in the form of the Common Agricultural Policy (CAP). Mr. Chirac, not willing to give an inch, ruled it out. A proposal from Luxembourg would have ended the British rebate and left open the French CAP benefits to discussion midway through the next budget. This proposal could not be taken seriously by the English.
What was so clever in Mr. Chirac's attack is where it put the English with their allies in Eastern Europe. Towards the end of the failed summit, Poland and the other Eastern European nations proposed paying more into the EU budget so the British rebate could be preserved. Mr. Chirac effectively drove a public wedge between the UK and "New Europe".
Why didn't PM Blair cut a deal? Mr. Chirac likes to think big in the long term but conducts policy in the short term, which explains his 24% approval rating. He is not willing to make long-term political choices that are painful and instead is working to detract attention from his failed policies and wound his neighbor across the channel.
Mr. Blair, who is set to take over the EU presidency for 6 months, thinks long term as well but is willing to make painful short-term moves to accomplish long-term change. Mr. Blair, sensing a weak Mr. Chirac and an even weaker German leader, likely to be replaced by a more friendly Angela Markel, is willing to wait to reform Europe. In order to do that, Mr. Blair must work out a framework for Europe not in an 11th hour room in Brussels, but by building an alliance with New Europe along with Germany to push the EU in a more competitive and US-cooperative direction.
That type of vision takes time and dedication. Mr. Chirac will continue to play the obstructionist. But if the Europeans want a "closer union", they would be wise to follow the Blair model.
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