By Dawn's Early Light

EU in the Headlights: Blair's Challenge

Fighting in the Family

United Kingdom and EU rotating President Tony Blair has a tough road ahead of him as he seeks to get the 25 nations of the European Union to agree on a seven-year budget.  The Common Agriculture Policy or CAP is loathed by the British, loved by the French, and attractive to the 10 new members of the union.  Margaret Thatcher, in 1984, was faced with a Britain that was much poorer and with little farming compared to the other EU members.  She negotiated the British rebate on UK membership dues, loathed by the French, loved by the British, and a growing drain on EU coffers. 

What complicates the entire framework of discussion is the current Doha round of trade talks that is stalled after Jacque Chirac killed even the lackluster EU offer to reform agriculture trade policies [see DEL: "Note to Brazil and India:Blame France!"].  According to The Economist, Tony Blair:

"proposes to increase Britain’s net contribution by a total of €8 billion ($9.4 billion) over the six-year budget period, either through a lump-sum payment or a reduction of the rebate. In exchange, he wants to see the overall budget cut. His plan trims about €24 billion off the €871 billion figure proposed by Mr Juncker, largely through cuts in rural-development aid and assistance to the EU’s new members in central and eastern Europe.

But though the proposal avoids direct confrontation on the CAP, the issue still looms large. Britain wants to keep the bulk of its rebate as compensation for the EU keeping the CAP. And Mr Blair’s plan calls for a review of all EU revenue and spending in 2008, when Britain will presumably once again go after the CAP with a carving knife."

To put the CAP in perspective, only 2% of the European workforce farm, the CAP sucks up 40% of Europe's budget (did you think it was going towards technology?), while 80% of the subsidy goes to 20% of the richest farmers. 

Why do people not in the EU care about how the Europeans want to misguidedly spend their citizens' taxes?  Because the subsidy significantly impedes development in the third world and is blocking an agreement on free trade.

What EU Stagnation Means to the Developing World

In 2003 the Europeans attempted a compromise that demonstrates how far the divide still is.  The Economist writes:

"In 2003, the EU agreed to replace a blizzard of farm-support payments with a single payment scheme, which subsidises farmers' incomes directly, rather than by paying higher prices for their crops and livestock. This should remove the worst trade-distorting aspects of the CAP. Farmers now get paid an average of only one-third above world market prices, compared with 80% in the mid-1980s. Overall subsidies are down: from over two-fifths of farm receipts in the 1980s to one-third and falling in 2004.

The trouble is that the 2003 changes were a classic case of only partial reform, as everyone knew at the time. They were too little both for Europeans and for Europe's trading partners. They did not affect tariff levels, which are now the main subject of dispute between the EU and the rest of the world. Nor did the 2003 reforms do enough to resolve looming budget problems. Even so, they went too far for many farmers, who now see themselves as an endangered species."

Given the recent French rejection of the EU Constitution and their desire to not create more political turmoil to compete against the Paris riots, there is little likelihood of any political willingness to promote change.

However, farm subsidies in the developed world are not constrained to just Europeans.  Another Economist article illustrates how beholden the OECD is to farm subsidies.

"There is, though, wide variation between OECD members. Producer support is worth less than 5% of farm receipts in New Zealand and Australia, but amounts to roughly 20% throughout North America, 34% in the European Union, and a whopping 60% in Japan. And while the overall value of support has fallen from 2.3% of GDP in 1986-88 to 1.2% now, the reductions have been uneven. Canada and Mexico have made deep cuts in their farm supports, for instance, while Turkey has actually increased its supports."

The developed world is worried about the spread of AIDS, radical Islam, avian bird flu, and a host of other troubles in the developing world.  However without radical farm subsidy reform, starting in Europe (as proposed by the United States) and followed by Japan, the Doha round will accomplish little.  If the developing world continues without the opportunity for sustainable development and the ability to trade for hard currency with the industrialized world, it will find other exports that may be far more costly to the world.

Terrorism, drugs, diseased and impoverished immigrants are the likely exports the third world will trade with the industrialized nations if a fair trade round is not concluded.  This will be far costlier than sustaining 2% of the European workforce.

The Belmont Club Weighs In on Merkel

Wretchard of The Belmont Club poses this important question: "What foreign policy will the new Chancellor of Germany pursue?"  Along with citing DEL, he links to Hero von Essens' piece "Angela Merkel's Travels (And Her Limits)," which reasons:

"Under Merkel, Germany's foreign policy focus will free itself of Schroeder's shortsighted French fixation, and she will desist from the anti-American posturing which so disfigured Schroeder and Fischer's tenure. Germany assumes the EU Presidency in 2007, so these small signs of opening up to the outside world are mildly encouraging for proponents of such things as reform of the EU budget, including the ludicrous CAP system, a more Atlanticist foreign policy, and integration of the new, eastern EU countries."

Wretchard then asks in reflection of Ms. Angela Merkel's recent European tour:

"Dawn's Early Light in comparing Merkel to Bismarck made a suggestive comparison. Bismarck unified Germany: what might she do for Europe? Although the European Union draft constitution has fallen into a coma, its departure did not permanently answer the question of what Europe should be."

Therefore, taking liberty with his two questions, let me rephrase: "How will Ms. Merkel's foreign and domestic policy, even in her weakened grand-coalition position, affect European development and integration?" 

Wretchard gives an interesting take on Germany, given its historical position on European and American relations.

"Now it is doubtful whether the European Union will be around in the year 2100 at all. Significantly the Germans did not share the French illusion of thinking the Second World War and the Cold War that followed was won from the Elysee Palace and Brussels. Germany knew that the fourth leading nation in Europe was located across the Atlantic. Puschmann  noted, 'It may not be immediately obvious at present, but Germany does, at least potentially, share Britain’s positive outlook on the transatlantic alliance. Post-war Germany has historically been an Atlanticist nation, standing firmly by the side of the United States and the United Kingdom'. If Merkel sees Europe within the wider context of the West, rather than through the fantasy prism of the Euroleft, she will at least have Bismarck's breadth of vision, though not, perhaps, his opportunities."

Where Chancellor Merkel stands on domestic and foreign policy issues is important to the extent she can influence international relations.

Step 1: Ms. Merkel Needs to Increase her Political Capital

For Ms. Merkel to succeed in transforming Europe and retaining power, she must increase her political capital.  Voters were reluctant to outright support Ms. Merkel's harsher economic reforms of her Christian Democrat Party compared to the Social Democrat approach of supporting the status quo that had failed to reform Germany's 11% unemployment rate.  While America may be the 50/50 nation, German's unfortunately can't even get either party's plan to a 50% voter approval rate.  Given the state of affairs in Germany's current government, Ms. Merkel benefits from extremely low expectations.  Yet she and her chief political opponent share a good deal in common that may help with bringing modest economic change.  As The Economist notes:

"Both of the country's big parties are now led by eastern Germans: the Christian Democrats by Angela Merkel, the prospective chancellor, and the Social Democrats by Matthias Platzeck, premier of Brandenburg. Predictably, the tabloids say that Ossis are the new Bossis. More striking are the similarities between the two.

Both leaders grew up in Brandenburg; both are 51; both are Protestant; both come from a relatively bourgeois background (Ms Merkel's father was a priest, Mr Platzeck's a doctor); both became scientists; and both are divorced, although Ms Merkel has now remarried and Mr Platzeck has three adult daughters. The pair's political lives have also developed in parallel. Both entered politics after the fall of the Berlin Wall (Mr Platzeck as a Green minister in East Germany's last communist government, Ms Merkel as a spokesperson for the first democratic one). Both rose through the ranks and took the helm of their parties more or less by accident. Both are modernisers, but also pragmatists."

Ideologues do not make for good compromisers but pragmatists do.  Ms. Merkel has strong convictions but is shrewd enough to make incremental advances.  This may buy her time domestically to bring about economic change.  The negotiated "coalition contract" will raise the sales tax (VAT) from 16% to 19%, increasing the retirement age to 67 from 65 for workers born after 1970, cut spending by $41 billion in order to create a budget that does not increase debt beyond the 3% of GDP allowed by the EU (source The Economist). So while domestic policy may be limited for great short-term success, Ms. Merkel is unlikely to lead Germany along Schroeder's self-destructive path.

Step 2: Foreign Policy is Ms. Merkel's Key to Achieve Political Capital

Ms. Merkel's political capital for domestic reform and winning an election 4 years out will require a winning European foreign policy.  I see her opportunities as follows in Europe:

1. Tony Blair and Jacque Chirac have vastly different goals for the United Kindgom and France and are often bitter enemies politically.  France and Britain need an "honest broker" to help compromise on the British Rebate and Common Agriculture Policy (CAP).
2. Former Chancellor Schroeder's relations with President Bush were icy at best.  America, fighting it out in Iraq, needs allies in Europe.  Ms. Merkel, not caught up in the Blair/Chirac feud over the War in Iraq, can be an "honest broker" for America with Europe.
3. French President Jacque Chirac, weakened by the recent internationally devastating Paris Riots, can no longer claim French Socialism is the model for Europe.  Ms. Merkel can play an "honest broker" in a middle approach between Anglo-American capitalism and French socialism to pull together a weakened European Union.

Otto von Bismarck's brilliance was apparent in his ability to fashion alliances to strengthen Germany and keep a healthy balance in Europe, playing the French, British, Russians and Eastern Europeans at times against each other.  Ms. Merkel's ability to be an "honest broker" towards Europe and with Washington across the Atlantic may allow her the flexibility to again bring about radical reform to restructuring a broken Europe.  A more efficient Europe will enhance the German economic engine that has historically powered Europe.

This does not answer the important question of "what Europe will be," but it does hopefully address Ms. Merkel's ability to build the political capital necessary to push forward a Europe that would integrate East and West, with an economic model more towards capitalism than socialism and ultimately not at loggerheads with American foreign policy.

Germany's Angela Merkel the Next Bismarck?

November 26, 2005 - Welcome Instapundit and Belmont Club readers.  Make sure you click on the comments section to read some challenging ideas by Joe Katzman and M. Simon of Winds of Change along with UK's Peter Gentle of the up and coming Polish based blog Beatroot and systemic thinker Dan from tdaxp.  Also see DEL post "The Belmont Club Weighs In on Merkel" as a follow up to the Belmont Club piece (above).

Prussian Bismarck's Strategic Genius

Otto von Bismarck was the brilliant leader of Germany (1862-1890), responsible for unifying the country, building an empire and securing peace in Europe through a complex system of alliances that his successors could not maintain.

"His most significant policy objective was that of securing German unification; he took advantage of skillful diplomacy and a series of wars to achieve this goal...  In foreign affairs, opposed to his previous "Blood and Iron" policies before the unification, Bismarck pursued the goal of uniting Germany under Prussia's leadership, and as 'honest broker' securing the German Empire's position by maintaining peace in Europe with a complicated system of alliances."

Bismarck built a strong German military, sought to not compete with the British with its colonies or navy, contain the French by securing alliances with Austria, Italy and at times Russia.  He was the leading statesman of Europe, being responsible for such treaties as the "Three Emperors' League" (Germany, Austria-Hungary, Russia), "Triple Alliance" (Germany, Austria-Hungary, Italy), "Reinsurance Treaty" (Germany, Russia).  What Bismarck created in Europe with him at the helm provided great stability for Europe (though not necessarily needed economic reform), but was too complicated a system for leaders of less than his caliber to grow, let alone maintain.  The result of the failure of European leaders to continue the balance of power in Europe led directly to the First World War [DEL strongly recommends Pulitzer Prize winning, Barbara W. Tuchman's Guns of August as an exceptional novel on WWI, Dr. Henry Kissinger's Diplomacy and noted Military Historian John Keegan's The First World War] and changed civilization forever.

Former German Chancellor Schroeder's French Folly

The balance of power in Europe changed radically after the collapse of the Soviet Union.  Germany became focused on integrating its two separate countries.  The United Kingdom continued its Atlantic focus while slowly moving towards European integration.  This left France coyly attempting to leverage German strength yoked to Franco-diplomacy, thereby creating a new center in Europe.   

Once Gerhard Schroeder defeated Helmut Kohl for leadership of the German state and her diplomacy, his goals where short term in nature.  Attempting to secure his position in power domestically appeared often his only long-term goal.  Chancellor Schroeder tacked every which way the wind blew to gain domestic support, including anti-American positions, such as colluding with the French to thwart US efforts in Iraq.  He succeeded in damaging the US-German relationship and threw his efforts behind Franco-Russian diplomatic enterprises, even creating a "special relationship" with Vladimir Putin, to the rightful frustration of Poland. 

While UK Prime Minister Tony Blair was often described as America's "Poodle" in the British media, Chancellor Schroeder proved himself far better as Chirac's "Poodle".  German foreign policy was marked by stagnation in the past decade without pushing forward major economic reforms other than European Union integration (with an anti-American bent) that moved along until the French "Non" vote and betrayal of the German position over the EU Constitution [See DEL posts "Why France's Self-Destruction Matters" and "France and the EU Constitution"].

Germany's economy, much like France's, was marked by chronic high unemployment and a growing welfare system, and was unable to support a future Germany that was robust in world affairs.

German Chancellor Angela Merkel's Brilliant Diplomacy - Another Bismarck?

Asia Summary

For Dawn's Early Light readers interested in Asia, here are some articles worthy of mention, though due to my cold I will not be able to provide the normal longer commentary.  However, they are well worth reading and mentioning in this space.

Japan Draft Constitutional Changes Strengthens Military

"Japan's Draft Charter Redefines Military", Washington Post, November 23, 2005

"The governing Liberal Democratic Party on Tuesday released a draft revision of Japan's pacifist constitution that for the first time since World War II would recognize the country's armed forces as a fully functioning military...

The constitutional draft would broaden the government's ability to send forces overseas; such an order now requires special legislation in parliament.

The revision also opens the door to a broader interpretation of the constitution, permitting what some call "collective self-defense" -- or coming to the military aid of other countries. The most likely beneficiary would be Japan's closest ally, the United States, which has urged Japan to adopt such measures. Changes in Japan's constitutional status would have major significance in the region, particularly in the event of a conflict between China and the United States over Taiwan."

DEL posted on this development in "What is Japan's Asia Strategy? (Part II)" on October 29, 2005.  After PM Koizumi's crushing September 11, 2005 electoral victory and his ability to purge his LPD party members that were unsupportive, he is in a good position to continue steps towards strengthening the US-Japanese alliance as well as contain China over issues such as Taiwan and check China's growing military strength.

India to unveil new thinking on foreign investment

The Financial Times (subscription required) writes an article on the above title that is important with respect to India's goals in catching up to China and put some extra horsepower into their economy.

"India’s Communist-backed government will on Thursday afternoon consider a sweeping liberalisation of foreign direct investment rules that would kick start a long-stalled programme of economic reforms.

Kamal Nath, India’s minister for commerce and industry, has proposed allowing 100 per cent foreign direct investment in a range of sectors, including airport construction, oil & gas infrastructure and cash & carry wholesale trading."

Indonesia to Again Receive US Military Support

The US wants Indonesia back in its sphere of influence and not that of the Russians or Chinese.  Goodwill created by the US in the wake of last year's devastating tsunami helped US standing in Indonesia.  This, coupled with its strategic importance as the largest Muslim nation, is the reason for the aggressive US diplomatic move.  The Asia Times Online reports:

"Citing 'national security interests' and noting that Indonesia plays a strategic role in Southeast Asia and is a 'voice of moderation in the Islamic world', the US State Department jumped the gun on Tuesday and lifted a Congress-approved arms embargo against Indonesia.

With East Timor now independent and Aceh no longer a theater of war, Indonesia's pressing need is to upgrade its armed forces to cope with internal security, fight terrorism, guard vital sea lanes, protect the country's numerous oil and gas platforms from terrorist strikes and enforce its maritime boundaries to prevent foreign trawlers from poaching its resources.

Smuggling, illegal fishing and maritime piracy are rife in Indonesian waters, and the addition of more sophisticated vessels will go a long way to curbing these threats...After discussions with President George W Bush, Yudhyono, an ex-general, told a news conference, "I am not pleading for a resumption. We deserve it because we have undergone a reform in our military, with an emphasis on respecting human rights and democracy."

The bulk of Indonesia's hardware is US-made and the TNI - as the army is called - suffers shortages as it can't get replacements and spares.

As a result, Jakarta has increasingly turned to Moscow. After Yudhyono's discussions with Russian President Vladimir Putin, it was announced that both leaders had agreed to start up intensive negotiations on setting up a joint production facility for certain sophisticated military equipment and to develop a national defense industry in cash-strapped Indonesia."

Read the whole article for the details on Indonesia's Type 209-class submarines, Ahmed Yani-class ships, Tribal-class frigates, Claude Jones-class frigates, F-5 fighter and A-4 attack planes, F-16As, Su-27SKs Su-30MK fighters and Hawk 209 light attack jets.

China's Awkward Relations with the EU

DEL has written before on the failure of Chinese foreign policy to lift the arms embargo from the European Union (thanks to a strong US diplomatic effort against French profit motives).  Another Asia Times Online piece discusses the EU-French-Sino relationship.

"The recent state visits by President Hu Jintao to the United Kingdom, Germany and Spain are the latest steps in a continuing effort by the Chinese government and its European counterparts to strengthen their ties, but they also demonstrate some of the contradictions China faces in dealing with Europe and its constituent member states.

Both the European Union and China have described their relationship as strategic, although sometimes this seems no more than a hyperbolic way of saying each considers the other important. It is perhaps true that the relationship is more strategic for China than the EU. The promotion of multipolarity is one of the key foreign policy aims of the Chinese government, and the EU is a crucial element in the policy." 

The piece discusses UK, German and French positions within the EU trade and military policy regarding China. 

Hope you enjoy the articles.

Blair to Link Doha Trade to Security

The Doha round of trade negotiations has not progressed far.  Dawn's Early Light blames France for the lack of progress in moving towards reduced barriers in farm trade to help the developing world do just that, develop [see DEL here with description on history of Doha trade round].  The Bush Administration proposed a radical reduction in farm tariffs that was half met by the EU, but even that lacked French support.

UK Prime Minister Tony Blair is to give a major policy address at Whitehall on Wednesday stressing the need for the industrial nations to come to an agreement on moving free trade forward before the next trade round is concluded in Hong Kong. The Financial Times reports:

"In a bid to underscore the wider importance of the trade talks, Mr Blair will say that 'there is no security or prosperity at home unless we deal with the global challenges of conflict, terrorism, trade, climate change and poverty'.

In a message that is likely to be seen as an address to fellow EU members, Mr Blair will claim that the benefits from an agreement to reduce payouts to farmers would not only benefit the developing world. EU countries could make up to €20bn (£13bn) a year more from trading opportunities.

'Self-interest and mutual interest are inextricably linked,” Mr Blair is expected to say.'"

This is a bold and innovative bid by Mr. Blair, in light of the recent French riots [See DEL here,  here, here and here].  Mr. Blair is subtly, and likely rightly, implying:

1. that a failure to bring about trade reform in agriculture,
2. will lead to a continued impoverished third-world,
3. that will encourage an acceptance of radical Islam, thereby
4. creating more unrest in Europe and elsewhere due to large Muslim immigrant populations.

France is the obstacle to EU farm reform, largely due to its socialist policies of supporting farmers. But now French domestic opinion is fearful of their large immigrant population that is largely Muslim.  France may be more open to shifting their veto over EU trade policy to bring about third-world reform that contributes to the sense of Muslims not being respected in Europe. 

While DEL largely believes the French riots were at their root caused by high chronic unemployment, the argument of not being able to assimilate the Muslim immigrants into European society is, nevertheless, an obvious problem.

Will Mr. Chirac, PM Tony Blair's nemesis, listen?  Probably not.  But one must give Mr. Blair points for trying. 

Rumsfeld and UK Defense Secretary Comments

The US-UK special relationship is the cornerstone of American foreign policy in Europe and arguably the Middle East as well.  This past November 7th, US Secretary of Defense Donald Rumsfeld and UK Secretary of State for Defense John Reid gave a joint news briefing (the full text can be found here).

Sec. Rumsfeld thanked the British:

"Throughout much of modern history, the special relationship between the United States and Great Britain has dealt repeated blows to totalitarianism of various stripes.  The world is safer and our countries are safer because of the uncommon steel of the British people.  We're grateful for our partnership and for your friendship, Mr. Secretary."

Considering PM Tony Blair's extreme costly political efforts on behalf of the special relationship, it was the least the Secretary could say, and his words are well true.

Sec. Reid begins his address touching on the same subject while expanding on the threat faced to Western Civilization:

"I'm delighted to be here, and I hope the fact that we are standing together on so many issues -- which we've discussed today, from Iraq through Afghanistan and the many other theatres where we are working together; more importantly, our service men and women continue to work together -- is a symbol of our enduring relationship.

I think the thing which lies at the heart of that is shared values, and the struggle which is going on on the global sphere at present is indeed a battle of our values.  It is at heart an ideological struggle between those of us who adhere to 21st century values and those who are trying to impose seventh century values in large sections of the world.  Though it is ideological at heart, it manifests itself in the worst forms of terrorism -- innocent civilians targeted indiscriminately by people who have no constraints of morality, conventions or legality.  It therefore makes it a very, very difficult battle for the young service men and women who serve both our countries with such distinction, courage and fortitude."

It is important that the discussion of radical Islam be framed as a battle against the West on a "battle of our values".  From an American perspective, this distinction seems often lost on the European press, not to mention a few US publications as well. Sec. Reid goes on to attack those in the Main Stream Media (MSM) and elsewhere who argue that change in Iraq is going too slow, by putting it in a historical context.

"I've had some people say that the failure to achieve absolute unanimity within 18 months was indeed a failure.  Well, coming from a country, the United Kingdom, which has a similar continual discussion about the nationalities within a nation-state, and now in the 837th year of trying to resolve the Irish settlement in Northern Ireland and the 300 years just having settled the Scottish one, I think the Iraqis have done damn well to get where they have in 18 months quite frankly, Secretary Rumsfeld.  And to see 64 percent of the Iraqi population coming out in the elections, a greater turnout, despite the threats to themselves, than there was in our general election and probably your presidential election, is a sign of encouragement."

While the conference was a good opportunity for the two Secretaries to give their continued view and rationale for the direction of the campaign in Iraq, the question-and-answer session hit upon some interesting topics.

Joint Strike Fighter

Regarding the JSF program, which will be the largest ever US military purchase, spanning the AirForce, Navy and Marines with different versions of the JSF along with orders from the British and Japanese governments, the US commitment was called into question.

"[W]e're pretty confident that the United States, in their own interests, not just in ours, will make the sensible decisions on the Joint Strike Fighter.  It is true, it is a huge part of our future planning.  We don't have forces, or for that matter the budget the size of the United States.  But we do, I believe, have forces that are equipped, capable and active in terms of meeting the modern threats.  And part of that is the ability to reach out, to have sustainable reach.  And that is why we've ordered a final perusal of our plans to build two carriers which are three times the size of anything that we've got at present.  And if we have such carriers to sustain a presence a long distance from the United Kingdom over a long period, we need a good airplane to operate off them.  And the airplane we want to get is the Joint Strike Fighter, and I see no reason at the moment to be worried about that."

Iranian and Syrian Involvement in Iraq

On the issue of Iranian and Syrian involvement against coalition forces in Iraq:

"Q: Mr. Minister, the top British general down in Basra last week said that he was concerned and had solid evidence that Iran was moving technology and materials over into Iraq.  Can you elaborate on that and your concerns, especially in southern Iraq, with these explosives coming across the border?

SEC. REID:  Do you mean General Dutton?

Q:     Dutton.  Yeah.

SEC. REID:  Yeah.  Yeah, well, for obvious reasons I don't want to go into the technicalities of it, but it is our belief that the nature of the devices being used against British troops and possibly elsewhere in Iraq in recent months bear the hallmark of groups like Hezbollah and may well be connected with elements within Iran.  We don't have the evidence that says this is being backed by the Iranian government, but it is nevertheless worrying, and we've made representations to Iran, because it would obviously not be right for a country to be publicly supporting democratic self-determination in Iraq at the same time as it was allowing or in any way encouraging the use of terrorism or violence.

So it's as simple as that; we have put that.  And putting it in a wider context, of course, if we have those worries -- along with the duplicity which Iran has been using in the development of its nuclear capability -- as witnessed not by me or Secretary Rumsfeld, but by the International Atomic Energy Authority, and then the sort of statements that we've seen from the Iranian president about wiping off the face of the map another member state of the United Nations, then all of these items come together and they are worrying."

The GWoT Hits London

The terror attacks in London today, composed of 4 separate bombings, with 3 to the London Underground and 1 to a commuter bus, during the G-8 summit in Scotland, is a painful and tragic reminder of the importance of fighting and winning the Global War on Terror.  I will post more on the subject as more information develops.  However, I would like to point you to President Bush's words from the G-8 Summit:

"The contrast between what we've seen on the TV screens here, what's taken place in London and what's taking place here is incredibly vivid to me. On the one hand, we have people here who are working to alleviate poverty, to help rid the world of the pandemic of AIDS, working on ways to have a clean environment. And on the other hand, you've got people killing innocent people. And the contrast couldn't be clearer between the intentions and the hearts of those of us who care deeply about human rights and human liberty, and those who kill -- those who have got such evil in their heart that they will take the lives of innocent folks.

The war on terror goes on. I was most impressed by the resolve of all the leaders in the room. Their resolve is as strong as my resolve. And that is we will not yield to these people, will not yield to the terrorists. We will find them, we will bring them to justice, and at the same time, we will spread an ideology of hope and compassion that will overwhelm their ideology of hate."

The long-term question of the bombings is what effect it will have on the UK effort to prosecute the GWoT and the reaction of other industrialized powers.  In the meantime, my prayers and sympathies are with the families of the murdered and injured.

Other great sources for following events today:

• Google News
• Winds of Change (Bill Roggio's comments here)
• Instapundit
• The Command Post

According to the British Embassy in the US:

"Inquiries concerning US citizens should be directed to the US State Department. The telephone number is 1-888-407-4747.  The emergency hotline number for British citizens is 011 44 870 156 6344."

Update: Text of PM Tony Blair's comments here.

Balance of Power in Europe

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.

Suggested Reading for more insight:

1. The Economist "Europe's identity crisis deepens"
2. The Guardian "Blair defends rebate stance to MPs"
3. The New Zealand Herald "French press put boot into Chirac"
4. Financial Times "Blair takes diplomatic line over EU budget"
5. Der Spiegel "EU Summit Collapse is 'Historic Failure'"

Why France's Self Destruction Matters

I have received comments and email when I have posted on European matters, such as the rejection of the EU Constitution, that question the relevance of these issues to US foreign policy.  Many view the European project as an enterprise of long conversations with little change.  Europe, long now weak on "hard" power, is becoming even softer in the "soft" power category, many rightfully charge.

However, while following power is important, the reverse is also true.  Where there is a vacuum, changes usually occur, and oftentimes radical ones at that.  From the turn of the 20th Century sick man of Europe, Turkey (of the late great Ottoman Empire) to the Soviet Union's disintegration a power, vacuum creates great uncertainty and often leads to shifting alliances with major powers.  Fourteen years after the fall of the Soviet Union, many of the former Soviet states are actively pursing a policy that aligns them with the West and in the good graces of the US foreign policy and military establishments. 

The Franco-German alliance

The Franco-German alliance, centered around a socialist, non-US world centric view, attempted to take the European nations (both East and West) in a direction that reflects their economic and strategic priorities.  The Iraq War was a clear case in point.  Gerhard Schroeder's siding with Mr. Chirac and turning away from the US, a historic ally, and Great Britain helped him secure his party's narrow reelection.  His chance of beating Ms. Markel, with no anti-US sentiment to again rally his people, is grim come September. 

Mr. Chirac's 24% approval ratings (almost half that of the world-hated Mr. Bush's approval ratings) and his defeat over the EU Constitution led him to elevate Mr. Dominique de Villepin (the chief French "Non" at the UN against the US position) to be Prime Minister.

Double-digit unemployment in both Germany and France are the chief reasons for their citizens' discontent.  What remaining soft power the Franco-German alliance retains in the EU is draining away as their economies continue to sputter.  This example from the Economist of Mr. de Villepin's prescription for handling the unemployment problem looks like a short-term solution with long-term problems.

"It relies heavily on subsidised municipal job creation. The scheme could dent the unemployment figures, which show that 10.2% of the workforce is without a job. But it will do little to free up the labour market. And its expansion will come at a price—an extra €4.5 billion ($5.5 billion) in 2006, said Mr de Villepin. He added that, as all extra money had to be dedicated to jobs, he would have to suspend Mr Chirac’s promised income-tax cuts. Even so, Eric Chaney, chief European economist at Morgan Stanley, says he is raising his budget-deficit forecast for 2006 from 3% to 3.5%."

Rather than take on structural reform of the powerful French unions, 35-hour work weeks, or 60-year retirement age that France cannot continue to afford, the government will pay large government contracts to unions through public debt and set aside already promised tax relief that would have encouraged new business.

The French solution is far from it.  Handing out benefits to the portions of their economy they most need to reform will continue to eat away at French soft power as they become an economic embarrassment to Europe, especially when viewed against Great Britain with a 4.8% unemployment rate. 

A British-German alliance?

With Tony Blair heading up the EU and being pro-American, and former East German Angela Markel likely to win Mr. Schroeder's job, the Franco-German alliance of the big three powers in Europe will collapse and with it, the dream of a European "third way" apart from the US.  France will find itself isolated further within Europe.

However, a weak Germany and a continued weak France, while cynically amusing to those in the US who supported the Iraq war and promoting democracy in the Middle East, is not in the long-term interests of the US.

An EU focused on economic growth, good structural policy, and a desire to invest in their military capability is in the US interest.  A British-German alliance within the EU would go a long way towards increasing Europe's relevance and promote stability not only on their continent but in the Middle East, Africa (as seen in the recent G8 debt relief) and Asia as well.

UPDATE:The Scotsman has an interesting article that leads "Blair aims to split Franco-German alliance" and opens:

"TONY BLAIR yesterday launched his strategy to isolate Jacques Chirac - by building an alliance with the woman expected to replace Gerhard Schröder as chancellor of Germany.

The Prime Minister's first stop when he arrived in Berlin was not to the Germany chancellery, but to visit Angela Merkel, the right-winger expected to come to power if the country's elections go ahead in September as planned.

While he was rebuffed by Mr Schröder yesterday, Ms Merkel gave a speech where she attacked Mr Chirac - and said that Britain's European Union budget rebate was fully justified, as it pays so much in taxes. Mr Blair spent half an hour in talks with Ms Merkel, and is understood to have presented her with an argument for a root-and-branch reform of the EU which would punish French farmers and reward eastern Europe."

What the French "Non" Means (Part I)

Mr. Chirac knew the train wreck was coming.  The opinion polls foretold the outcome.  The French citizens, united from the left and right of the political spectrum, handed their French leader and the EU a decisive "Non" to a deeper political union by rejecting the proposed European Union Constitution by a vote of over 55% against with better than 70% voter participation.

The cynic can point to the several-hundred-page document (219 in English - see page 8 and 9 for the preamble) and 243-word preamble and compare it to the US Constitution that opens with these simple, yet profound words:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

There were apparently too many competing political interests in Brussels during the draft of the European Union Constitution to produce a document that the average European could conceptualize, let alone explain to a neighbor.  It is striking that its potential demise was at the hands of the French rather than the English, who have yet to vote on it and now are unlikely to do so.

As Charlemagne argues in the Economist:

"The fact that the referendum campaigns in both countries have focused so much on the European Union as a whole underlines the dangers of the current debate. A 'double no' would not just signify rejection of the constitution itself. It might also start a backlash against elements of European integration that were already in place before the constitutional debate got going— in particular EU enlargement and the single market. The federalists' gamble would then have gone spectacularly wrong."

The cause of deeper integration may not just be stalled but could actually retreat as the heads of 25 nations must rethink a "more perfect union".  The French failure and likely Dutch government failure to ratify the constitution may have significant political, economic and military implications for the rest of the world.

The French EU Dream

The goal of Mr. Chirac in pushing forward the EU has always been twofold:  First, to leverage up French power by taking a primary lead in the EU to counterbalance the American superpower.  Mr. Chirac said in China:

"It is normal that a group of nations like the EU should wish to have the very closest relations with China, in such a way as to be able to build together the multipolar world which is in the process of being designed for tomorrow."

A multipolar world works by a counterbalancing system of relations.  Since the United States is the world's lone superpower, it is obvious what Mr. Chirac's goals are for the EU:  working in partnership through arms deals and economic arrangements to push forward a world order that constrains the US.

Mr. Chirac's second goal is to protect the French socialist system, which includes 35-hour work weeks and social benefits that are richer than most, if not all, in the EU.  As the Wall Street Journal (paid subscription required) points out:

"Voters in France, where unemployment is at a five-year high of 10.2%, worried that a more tightly knit EU would emphasize free-market reforms along American or British lines over France's traditional social protections. The emphatic 55%-45% 'no' vote warned Mr. Chirac not to go down that path. France's recent move to allow workweeks longer than 35 hours has already helped make his government unpopular."

With 10.2% unemployment in France and a projected growth rate of just slightly over 1% for 2005, compared to the US projection of 3.6% growth, the impact the "No" vote will have on the rest of Europe and the goal of political integration will be played out in the coming months and years.  Some of the effects likely will include:

• Investment uncertainties in Europe for all large companies (this will reduce investments)
• A move towards the dollar away from the euro.  This is especially important for the Chinese, who may continue to finance a large portion of US debt through the purchase of Treasuries
• Left-leaning governments in Europe (a majority of Western Europe) moving away from structural reforms to placate workers.  The lower income French workers and unemployed voted overwhelmingly against the EU (see WSJ article above)
• A slow-down of national legislation that increases interstate EU cooperation
• Stalled efforts on military integration that will continue to lead other friendly nations into joining American security arrangements
• A power struggle for the "driver's seat" of political leadership within Europe
• Less influence for European nations in world affairs, including possibly relations with the Middle East and Asia

However, the effect of the French vote will likely have some major implications for other powers.  I will address these in a follow-up post tomorrow.