Better Luck Next Year

Saturday, Dec. 10, 2005 By JAMES GRAFF / PARIS
JOHANNES EISELE / AFP-GETTY IMAGES TOUGH TIMES: Merkel and Chirac try to get along
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FRANCO-GERMAN VAPORS The death of the European constitution has forced the Continent's two biggest economies to look inward. The government of Prime Minister Dominique de Villepin, installed in June, has reaffirmed a fervid commitment to the French social model and pleaded for "economic patriotism" to protect French firms and jobs from foreign competition — even from within the E.U. The government seems keen to avoid European affairs, so much so that former French Foreign Minister and European Commissioner Michel Barnier says Brussels is "worried whether France will play its part in getting Europe going again." The questions of discrimination and colonial legacies raised by the riots, along with the gathering political battle to succeed Chirac, have kept France introverted. In Germany, Merkel is trying to walk a narrow line between the need for economic reform and the maintenance of a fragile coalition with her own Christian Democrats and the Social Democrats — both of which are undergoing painful internal shakedowns. Hosting Chirac in Berlin last week, she aligned Germany with France in criticizing Britain's budget proposals. But Chirac knows that she may not feel bound to knuckle under to France in defending agricultural subsidies the way her predecessor did.

HAPLESS BARROSO Even before former Portuguese Prime Minister José Manuel Barroso became Commission President in November 2004, he was a controversial choice. His liberal politics, and his presence in George W. Bush's "New Europe" coalition in Iraq, always raised doubts in France. This mistrust was exacerbated earlier this year, when Chirac blamed Barroso for pushing a proposal to liberalize services across the E.U. — thus aiding the no camp in the constitutional referendum. Largely ignored by Germany and France, Barroso has now tried to distance himself from his onetime ally Blair, decrying his budget proposal for sending "a message of a Europe downsizing to the lowest common denominator." There's no question Barroso has been dealt a difficult hand, but many observers criticize him for pitting the Commission against the member states, instead of trying to rally them to a higher cause. "Any Commission President who doesn't have the backing of the large member states is toothless," says Katinka Barysch, chief economist at the Centre for European Reform (cer), a London think tank. "Barroso's been a disappointment."

TRADE-OFF Europe is due for withering criticism this week as crucial World Trade Organization (wto) talks get under way in Hong Kong, since Brussels' concessions on farm subsidies and tariffs weren't enough for the likes of the U.S., Australia and Brazil. Trade Commissioner Peter Mandelson wanted to go further, but Paris made it clear that if he promised too much on agriculture, France would veto a final wto agreement. Mandelson had hoped his offers on agriculture would kick-start negotiations on trade in services and industrial tariffs, but the talks barely moved. European farm protection was once again seen as the biggest global obstacle to free and fair trade, and the E.U.'s claims to leadership in the wto sounded hollow.

So is there any chance that 2006 will be brighter? "Economic reform is the A and Z of Europe now," says MacShane. Perhaps once the big Continental economies pick up, he suggests, Europe can feel its oats again. Others doubt whether Europe's current crisis-laden leadership has the clout and vision necessary to deliver any viable solutions. "The European integration process is in a very different place now to 10 or 20 years ago, and I don't think many people have made the mental leap needed to reflect that," says Mark Leonard, director of foreign policy at the cer and author of Why Europe Will Run the 21st Century. "We now have a single currency, a common foreign and security policy, and an external relations impact on places like the Balkans and Iran. So we need a different kind of project, something that simply works better." The sooner Europe finds such a task, the quicker it will forget its really horrible 2005.

With reporting by Leo Cendrowicz/Brussels