The heads of states of the 27 countries in the European Union met in Lisbon last week to iron out the remaining differences on the new reform treaty. The new Lisbon Treaty is scheduled to be signed on 13 December and is essentially a downsized version of the EU constitution rejected by the French and Dutch voters in 2005. The negotiations went remarkably smoothly with only the customary wrestling with the Poles, up outs to the Brits and a few rounds of give-and-take across the board.
The question is now, how the new treaty will affect economic policy making in the European Union. The last time the EU head of states met in the Portuguese capital was in 2000 when they agreed upon the Lisbon Agenda, which called for economic reforms with the aim to “make Europe, by 2010, the most competitive and the most dynamic knowledge-based economy in the world”. Not much has happened since then in spite of the process being “restarted” in 2005. The EU is still overregulated, protectionist and over-endowed with old industries, while falling behind in international comparisons.
The new treaty seeks to streamline internal decision-making and to give the Union more clout internationally. A new president of the European Council is going to be elected for two and a half years at a time, replacing the previous system of semi-yearly rotating presidents. A High Representative for foreign affairs will get money, a diplomatic corps and the post as vice-president of the Commission. New voting rules and additional limits on the national veto will be phased in over a period of time. The number of commissioners will be cut, while the Parliament gains more influence in some areas. The treaty also calls for increased cooperation on issues concerning energy supply and climate change.
A main factor behind the Constitution and hence the new Lisbon Treaty is a perceived need to ensure the functioning of the Union after expansion from 15 to – at the latest count – 27 member countries. It is unclear whether this motive bears much weight in practice. The experience is that the expansions in 2004 and 2007 have not paralysed the EU’s institutions or decision-making. On the contrary, it has been argued that the extra faces around the negotiation tables have actually disciplined the hitherto talkative representatives from the “old” EU countries.
The strengthening of the executive powers as witnessed by the new posts as President and High Representative for foreign affairs may be a bit of a gamble. In particular, it is not clear whether the EU possesses check-and-balances to restrain possible abuse of power. With its colonial past and tragic history in the 20th century and with diverging interests across the Union, it seems challenging to devise a sensible foreign policy for Europe.
Returning to the economic consequences of the Treaty, one can see both a glass half full and a glass half empty. The half full view will be based on the argument that with the agreement on the new Lisbon Treaty, the disappointment of the Constitution can be put aside, so that the attention can be directed towards economic reforms that matter for peoples’ lives. This could lead to a new momentum for reforms of the Common Agricultural Policy, a more positive role of the EU in the WTO negotiations on liberalisation of world trade, new steps to get the Lisbon process back on track, etc.
The half empty view will start from the last minute editing of the treaty text in Lisbon, where French president Nicolas Sarkozy had removed the sentence stating that competition in the internal market of the Union should be “free and undistorted”. The treaty does nothing to address the tangled bureaucracy and waste of resources in the EU. The moving circus of the European parliament will continue, the three parallel working languages will remain and the accounts will remain murky.
Time will show which one of the views that is closest to reality. Overall, the new reform treaty is unlikely to affect economic policy making to any larger extent, with the possible (but rather unlikely) exception of the EU taking steps towards a common energy policy. The new Lisbon Treaty is unlikely to kill the Lisbon Agenda, but it does nothing to fundamentally alter the dynamics of economic policy formation within the Union.
The biggest concern is perhaps that the reform treaty does not address the most important issue facing the European Union, namely its democratic deficit. For most Europeans the Union is still a faraway bureaucratic “machine”, with which they do not engage themselves. The treaty does little to address the difficult question on how to foster participative democracy in a Union with half a billion inhabitants. That countries in periods will have no commissioner is not likely to strengthen the links between the EU and its inhabitants. The European Union will only gain legitimacy if it becomes more democratic – and delivers on its promises of economic progress and social cohesion.