Progress on Enlargement

08/11/2009

 

The final approval of the Lisbon Treaty opens the door to the European Union again. Many obstacles to further enlargement remain, but there has been significant progress during the Swedish Presidency.

Signature of arbitration agreement Croatia-Slovenia.  Photo: André Mkandawire/Swedish Government Offices

Signature of arbitration agreement Croatia-Slovenia. Photo: André Mkandawire/Swedish Government Offices

At a ceremony in Stockholm this week, the Croatian and Slovenian Prime Ministers signed an arbitration agreement on the border dispute between the two countries. Slovenia lifted its blockage of Croatia´s accession negotiations at the end of September. As a consequence, enlargement negotiations with Croatia now move forward at full speed.

The Presidency is careful not to take credit for the breakthrough, instead praising the political leadership of Croatia and Slovenia. However, behind the scenes there have been intense efforts to solve the border issue both by enlargement Commissioner Olli Rehn and by the Swedish Presidency. Carl Bildt´s statement on the eve of the Presidency was carefully crafted to put pressure on both sides. Croatia´s ambassador to France acknowledged the role of the EU and the US recently in an interview with Euractiv.

This week´s border agreement is not the end of the story. While Croatia´s Prime Minister Jadranka Kosor is saying that she will send the agreement to Parliament next week, her Slovenian colleague Borut Pahor is advocating an advisory referendum before ratification. But there will be significant progress in negotiations during the coming weeks. Sweden will be able to close a large number of negotiation chapters before the end of the year.

Iceland might well accede at the same time as Croatia. The Swedish Presidency skillfully achieved an agreement already at the Foreign Ministers´ meeting in end July to ask the Commission to prepare the opinion on Iceland´s membership. Another country at the helm might not have been as motivated to navigate the difficult waters of the economic compensation from Iceland to bank customers in the UK and the Netherlands. Sweden was able to prevent this question from delaying Iceland´s accession process.

Now the European Council in December is likely to agree that Iceland should be able to start accession negotiations early next year. Whether the Icelanders in the end will vote yes to membership is another story.

There has also been progress on the membership bids of Macedonia and Serbia, while Turkey remains a difficult issue and Cyprus is a cause of big concerns for the Swedes. The `big bang´ breakthrough of the first Swedish Presidency in 2001 will not be repeated.

Ratification of the accession treaties might become more difficult next time, with all the add-ons to the Lisbon Treaty that are supposed to be annexed to the treaties, and with a possible conservative government in the UK (Tony Barber writes well about the opt-outs on his FT Brussels Blog). Friends of enlargement should try to decouple the opt-outs from the ratification of the accession treaties.

Still, enlargement could be the success story Fredrik Reinfeldt badly needs, with failure on climate approaching.

But most of the credit should go to Carl Bildt and Olli Rehn.

 

A short note on the new posts in the Lisbon Treaty: I played a small role once during discussions on a Swedish Commissioner. My experience is that nothing is decided until very late in the process. I guess this is true for the two new posts as well. While it is fun to speculate, and others might have better sources when making their assessments, personally I will wait until more first-hand information is available. Maybe we will know more by tomorrow evening, after talks at the celebrations in Berlin.

One question, though. Is Michel Barnier really going to get the internal market portfolio in the new Commission? Earlier, I thought it would be too provocative to give this post to a Frenchman (don´t get me wrong, Barnier is very skilled, but politically it seems difficult). However, Barroso´s recent appointment of Mario Monti as an independent expert on the development of the internal market looks like a compensatory measure to fence off criticism when Barnier is appointed.

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Failure on Climate Financing

02/11/2009

 

Read the conclusions, do not trust press conferences. That is good advice when it comes to understanding political decisions – in the EU as well as in domestic policy.

José Manuel Barroso and Fredrik Reinfeldt claimed success on climate after the European Council. `The difficult question of “climate financing” has been resolved and the EU’s climate package is thus complete.´, the Swedish Presidency states on its website.

The text gives another impression. Fredrik Reinfeldt had to weaken key paragraphs considerably. As a result, there is no clear commitment from the EU on financing in the run-up to Copenhagen. This will complicate tomorrow´s talks with Barack Obama, as well as negotiations with other major emitters.

The European Council agreed on the overall amount needed for 2020, including private financing through emission trading and other means. But more importantly, there was no decision on the short-term financing, crucial for a political agreement in Copenhagen.

Before the EU Summit, Sweden had proposed the following wording:

`The European Council appreciates the Commission´s estimate of an overall financing need of EUR 5-7 billion per year for the first three years following an ambitious agreement in Copenhagen and underlines that the EU in this context is ready to contribute its fair share of these costs´

This text met strong resistance from Germany, Poland and others. As a result, there was no agreement on the financing need, in contrast to what the Swedish Presidency claims on its website. The paragraph in the final conclusions is:

`Taking note of the Commission estimate that a global financing of EUR 5-7 billion per year for the first three years is needed following an ambitious agreement in Copenhagen, the European Council underlines that a figure will be determined in the light of the outcome of the Copenhagen conference.´

Der Spiegel is right in describing the outcome as a success for Angela Merkel, who did not want concrete figures decided at the Summit. The Guardian, among others, gives a good overview of the failure to reach agreement on financial commitments.

There was also no agreement on the controversial issue of `hot air´, emission allowances in the Kyoto protocol not used by countries.

What does this mean for Copenhagen?

Fredrik Reinfeldt´s adviser for climate, Lars-Erik Liljelund, rules out a legally binding agreement. `It was somewhat stupid to make Copenhagen a bigger event than it is´, he says to Swedish newspaper Svenska Dagbladet.

How wise is it then to abandon the Kyoto protocol (which does not end in 2013) without securing an alternative?

 

Briefly on other issues at the European Council:

Fredrik Reinfeldt was more successful on institutional issues. The Lisbon Treaty is almost in place, a significant achievement by the Presidency. Another positive result is the progress on guidelines for the External Action Service.

On migration, the Summit agreed wording supporting tough border controls, but did not specifically mention the Geneva convention in a significant step away from earlier EU commitments.

The Baltic Sea Strategy was endorsed, a vague, non-committal document.

If the final hurdles for the Lisbon Treaty are cleared, there will soon be a decision on the new posts. However, dark clouds still loom over the climate negotiations in Copenhagen.


Climate Financing: The 50 Billion-Euro Question

25/10/2009

 

Words can be explosive. Especially if they imply that billions of euro will be transferred from state coffers.

So it should not come as a big surprise that the Swedish government has difficulties in finding agreement on the financing of climate adaptation measures in developing countries. EU Finance Ministers fought about the issue last Tuesday. Now, climate financing is likely to dominate the European Council on Thursday and Friday (together with discussions on the top posts in the Lisbon Treaty).

The draft conclusions for the Summit (prepared for the COREPER meeting last Wednesday) mentions both short-term and long-term costs. Two key sentences illustrate the stakes involved:

 “The European Council appreciates the Commission´s estimate of an overall financing need of EUR 5-7 billion per year for the first three years following an ambitious agreement in Copenhagen and underlines that the EU in this context is ready to contribute its fair share of these costs”

 “The European Council considers that the overall level of the international public support required could lie in the range of EUR 22 to 50 billion per year by 2020, subject to a fair burden sharing at the global level in line with the distribution key agreed by Parties…”

Poland is refusing to agree on concrete numbers without promises that the burden sharing will to a large extent be based on GDP, not only on carbon emissions. Negotiations are further complicated by the fact that Germany is forming a new government.

Billion Euro Baby: Finance Minister Anders Borg is keeping a firm grip on climate negotiations. Photo: Pawel Flato/Government offices

Billion Euro Baby: Finance Minister Anders Borg is keeping a firm grip on climate negotiations. Photo: Pawel Flato/Government offices

Thus, the conclusions are likely to be watered down. That may come at a high price. Climate negotiations are already in crisis, with a close adviser to Fredrik Reinfeldt ruling out a legally binding agreement in Copenhagen. If the EU Summit does not mention ambitious figures on climate financing, it will be even more difficult to achieve a political deal in December that is strong enough.

There are a number of other open issues. What should happen to the `hot air´, the emission allowances not used by countries primarily in Eastern Europe? How will the new system of flexible mechanisms work in practice and how will it be controlled? What criteria should apply for the distribution of financial support to developing counties? Will climate financing be additional to current development assistance?

Agreement at the European Council is further complicated by internal conflicts in the Swedish government. `I hope the rumour is true, that Anders Borg is running the government´, former Finance Minister Pär Nuder said at a seminar about the Government Offices last week. But when it comes to conducting the EU Presidency, a strong Finance Ministry is not always a good idea.

Regarding climate, Finance Minister Anders Borg seems to lack the diplomatic skills needed to find agreement among 27 Member States. Dogmatic instructions from Stockholm are making things difficult in Brussels. Unfortunately, the Prime Minister´s office is weaker this time than in 2001, when State Secretary Lars Danielsson was able to give negotiators clear guidance.

Agreement on climate change in Copenhagen is the Swedish government´s first priority for the EU Presidency. It would have been easier to achieve if Fredrik Reinfeldt had been more active from the start. Instead, the Swedish Prime Minister already in December last year stated that it would be difficult to agree new commitments for emission reductions by developed countries. The government negotiators are accused of trying to accommodate every divergent view instead of showing leadership in the way former chief negotiator Bo Kjellén did. In the important area of `policies and measures´, Sweden has not put forward any innovative proposals.

Some of the criticism might be unjustified. The task is difficult. However, the government has made a number of strategic mistakes. Fredrik Reinfeldt might have to pay a high political price for the lack of a strong agreement in Copenhagen.

Note: The excellent Arte blog on Europe also highlights climate and the Swedish EU Presidency.


Reinfeldt´s Big Test

18/10/2009

 

Preparing a European Council is never easy, but this time it seems extremely difficult. Few will envy Fredrik Reinfeldt, the Swedish Prime Minister. After Ireland voted yes to the Lisbon Treaty, the prospects for the EU Summit 29-30 October looked bright. Then Vaclav Klaus put forward his demands for concluding the Czech ratification process.

Yesterday, Vaclav Klaus made clear that he will not block the ratification until after the UK elections. He also backed down from demanding legal guarantees already now. However, Klaus is asking for a declaration that such guarantees will be included in the future – probably in connection with the accession treaty of Croatia.

This will be difficult for other governments to accept. Many would prefer a simple and strong message to Klaus: `F*ck off´. That is not how the EU works, however. There has been so many cases before when people making a lot of noise get a fig leaf to cover their retreat in the end. The most likely solution seems to be a declaration stating that the Charter of Fundamental Rights applies to EU institutions only, and not to issues within the competence of the Member States. Without any specific mentioning of issues related to the Second World War.

Will that be enough for Vaclav Klaus? Only the Czech President himself knows. But it is also an issue about what Member States such as Austria, Hungary and Slovakia can accept, and about the responsibility for EU leaders not to reignite old sensitive controversies. Vaclav Klaus should follow the advice John Cleese is giving to himself in Faulty Towers: `Don´t mention the war´.

Vaclav Klaus is a difficult obstacle, but there is also a positive scenario for the European Council.

If the Czech constitutional court already 27 October decides against the complaints about the Lisbon Treaty, and Klaus backs off, it might even be possible to keep to the original plan and fill the new posts at the Summit. This is very optimistic, but should not be ruled out entirely. Otherwise, the positions might be filled at an extra Summit in November, as foreseen by the Financial Times. Why not bet a euro on Dutch Prime Minister Jan Peter Balkenende as President of the European Council?

Climate is another nightmare for Fredrik Reinfeldt. It seems extremely complicated to reach a legally binding agreement in Copenhagen. On Tuesday, EU finance ministers will try to agree on financing, with environment ministers meeting the following day to negotiate the full EU position for Copenhagen.

Although there was progress in COREPER last Friday, sensitive issues remain, including the burden sharing of  additional financing and the future of the Clean Development Mechanism. Environment ministers will also have difficulties agreeing on how to handle the `hot air´  in the Kyoto protocol, the emission allowances not used by the participating countries.

On another issue, Reinfeldt can be more optimistic. The Swedish Presidency has been very active on the principles for the External Action Service, which will be established by the Lisbon Treaty. Although there has been differing views on inter alia the competence of the EU Commission, a compromise solution now seems close.

According to a text to be discussed by COREPER tomorrow, the controversial issue about development assistance would be solved by emphasizing the High Representative´s role as Vice-President of the EU Commission. Strategies and similar decisions of principle would be submitted to the College by the Commissioner for Development Aid, in agreement with the Vice-President, but detailed programming would be the sole responsibility of the Commissioner for Development Aid. Should this compromise satisfy Member States, the Swedish Presidency will have at least one positive result to show at the European Council.

If Reinfeldt also can overcome the resistance of Vaclav Klaus, he will be able to claim success at the Summit. But climate negotiations remain a dark cloud over the Swedish Presidency.


A decisive week for Latvia

11/10/2009

 

`Let´s hope for the miracle save´

That was the response from a high-level official at the Swedish Central Bank in December 2008 when former IMF senior economist Torbjörn Becker questioned the policy towards Latvia. The comment was made public last week, when the Supreme Administrative Court gave me access to some of the official Swedish documents regarding Latvia´s economy.

Not as friendly as it seems. Swedish Prime Minister Fredrik Reinfeldt and Latvian Prime Minister Valdis Dombrovkis. Photo: Gunnar Seijbold/Swedish Government Offices

Not as friendly as it seems. Swedish Prime Minister Fredrik Reinfeldt and Latvian Prime Minister Valdis Dombrovkis. Photo: Gunnar Seijbold/Swedish Government Offices

Torbjörn Becker, Director of the Stockholm Institute of Transition Economics, had sent an e-mail first to Christoph Rosenberg at the IMF, then to the Swedish Central Bank (Riksbanken). In his e-mail, Becker criticized the painful defense of Latvia´s fixed exchange rate with argument he and others have later used in the public debate (although with somewhat more diplomatic language):

`It seems that (the IMF statement on Latvia) mostly is a way of defending the honour of their politicians and central bank, as well as protecting the Swedish banks, when nothing is done about the currency in a situation when every normal person understands that an overvalued currency does not help the necessary adjustment of the current account balance. Now they will instead get a meltdown of the real economy, if there is not a miracle save of the world economy´ (my translation).

No one seems to have listened. The laconical response was: `Let´s hope for the miracle save´.

Swedish Finance Minister Anders Borg had already decided to support the Latvian government´s efforts to preserve the exchange rate of the currency, lats. According to several sources, one reason was the heavy losses Swedish banks would suffer if there was a devaluation in Latvia (although Anders Borg denies this).

The rescue package put together almost a year ago is now close to failure. Developments next week will be crucial.

Tomorrow, the Latvian government is supposed to agree further reinforcements of the budget with 175 million lats. At the latest ECOFIN meeting, Anders Borg threatened Latvia with serious consequences unless the budget target was achieved. After some friction between the Latvian and Swedish government, the aim is now to have a budget decision ready when EU Commissioner Joaquín Almunia visits Riga on Tuesday.

Whether all parties in government can agree to further budget cuts and a property tax remains to be seen. Drastic reductions of social welfare and public salaries are already taking a heavy toll. Latvian Prime Minister Valdis Dombrovskis is right in saying that further budget cuts would hurt the economic recovery and increase social unrest.

Still, Latvia will be forced to close even more schools and hospitals, because of the rigid policy of the EU and the IMF.

I have written extensively earlier about Sweden and the crisis in Latvia, and many others (including the Financial Times) have criticized the approach by international lenders.

The question now is whether the Swedish EU Presidency will continue along a path that could led to economic collapse in Latvia and dangerous political instability in a strategic part of the European Union.

Do all EU governments believe in miracles or is there still some strategic thinking left?


The crisis is not over

04/10/2009

 

A feeling of relief was evident among EU policy-makers when the result of the Irish referendum was made public yesterday. The revised Lisbon Treaty had cleared the most significant hurdle.

Everybody is now looking at the Czech Republic, wondering what the next step of Vaclav Klaus will be. Fredrik Reinfeldt will meet his Czech counterpart on Wednesday, at the same time as Cecilia Malmström visits Prague.

The signature of Vaclav Klaus is crucial for the institutional development of the EU. Hoever, there is a risk is that an even more fundamental problem is forgotten. The gap between citizens and EU institutions still remains.

It has taken seven years to get this far with institutional reform – and it will not be enough if the EU is really going to play a strong role on the international scene. More urgently, hard decisions on climate change, reform of the common agricultural policy and enlargement will be difficult to take as long as citizens do not feel connected to policy-making in Brussels.

That is why Margot Wallström´s communication portfolio in the present Commission has been so important.

Critics are partly right. Progress has not been quick enough and there is a tendency (more by Barroso than by Wallström) to reduce communication to PR. The task was never going to be easy.

That does not mean that the basic idea was wrong. On the contrary, opening up EU institutions and creating a `democratic infrastructure´ should be an even more important task for the next Commission.

Margot Wallström has been successful in a number of areas. Interactive communication on the Internet, Citizens´summaries for new proposals, EU Youth Summit, European citizens´ consultations.

However, other developments in the EU have not been as encouraging.

The Commission proposal for a revised regulation on access to documents has been critized for not going far enough, even weakening some of the current provisions.

Although a voluntary register for lobbyists has been established, many remain outside the system. EU regulations on lobbyism still lags far behind the US, where Barack Obama has recently established even more stringent rules.

The Council of Ministers is still lacking in transparency, to some extent because openness has never been Javier Solana´s favorite theme. Sometimes, statements from the Council are politically insensitive and further decrease the trust in EU institutions. ECOFIN´s threat to Latvia this week is one such example.

Even if Lisbon is finally approved, the fundamental crisis of confidence remains. The next Commission should build on the new Treaty and move quickly to implement the articles on citizens´ intiatives and on civil society.

Barroso should appoint a new Commissioner with a stronger mandate to improve transparency and consultation with citizens, and to strenghtening pan-European civil society.

Relaxing is not the right answer to ratification of the Lisbon Treaty.


Confrontation with Iran getting closer

27/09/2009

 

Tension is growing between US, Europe and Iran as the meeting in Geneva on Thursday approaches. After Iran´s test-firing of two short-range missiles, a test with the Shahab 3 long range missile is scheduled for Monday.

Although Iran´s nuclear program is arguably the most controversial and dangerous issue on Europe´s foreign policy agenda, decision-making is still dominated by the big three – Germany, France and the UK. How wise is it for other Member States to accept this approach?

On Friday, Barack Obama, Gordon Brown and Nicolas Sarkozy sent a strong message to Iran, linked to the second uranium enrichment facility near Qom. Angela Merkel associated herself with the joint statement. Nicolas Sarkozy also said: “If by December there is not an in-depth change by the Iranian leaders, sanctions will have to be taken.”

Although there was a discussion on sanctions at the Gymnich meeting in Stockholm, as well as later, the December deadline set by Sarkozy in New York does not seem to have been fully co-ordinated among the EU-27. Still, the security consequences for all Member States could be immense.

After the strong statements in New York and the Iranian missile tests, the path towards tough sanctions seems almost inevitable. But where does it lead? Interviewed by The Guardian, David Miliband did not rule out military action if diplomacy fails.

There is always conventional wisdom on what is politically possible or not. Since 2003, the established view on Iran has been that the E3 should conduct negotiations, with Javier Solana at their side.

“It´s alright as long as things go well”, a high-level Swedish diplomat said when I asked about the 3+1 approach in 2004. Well, it hasn´t exactly been a success.

The earlier “no talks as long as enrichment continues”-line could not be questioned, but turned out to be a failure. Now, it has been abandoned. Including broader security issues in the dialogue with Iran was not possible in 2003 due to political pressure from the Bush administration. That also seems to have been a mistake.

There is no reason to be soft on the brutal dictatorship in Iran. The leadership has struck down peaceful demonstrations and concealed parts of the nuclear program. But by treating Iran different from other parties to the non-proliferation treaty – not to mention Israel – the EU3 are giving the hardliners in Teheran an argument at home. Don´t underestimate the anti-colonial feelings in a nation proud of its long history and culture.

Instead of ultimatums, the EU could make its “carrots” more attractive, by improving trade offers, discussing broader security issues, and dealing also with Israel´s nuclear program. Philip Stephens recently argued well for a strategy built on incentives in the Financial Times.

That does not mean that the EU should rule out tough action towards Teheran, just that Iran should be treated as everybody else. The fact-based approach of Mohamed ElBaradei at the IAEA has been better than the aggressive words of Europe´s nuclear powers. There is still scope for a strategy build more on incentives than on threats.

The December deadline puts pressure on Swedish EU Presidency. Iran will most likely be high on the agenda for the EU Summit 29-30 October, but no presidency so far has been able to keep the big three from acting on their own.

Are Bildt och Reinfeldt being sidelined? Well, the Swedes are doing what they can to keep the issue about sanctions within the established EU procedures, but it is not an easy task.

Iran will be one more test for the credibility of the common foreign policy, and is already one more reason for the new High Representative not to come from one of the three biggest Member States.