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GLOBALISATION: Amid Budget Spat, EU Searches for the Big Picture

Stefania Bianchi

BRUSSELS, Oct 25 2005 (IPS) - European Union leaders are meeting this week to debate the bloc’s future place in an increasingly competitive world, while trying to avoid awkward topics that threaten its cohesion.

The summit, to be held Thursday in the historic Hampton Court Palace just outside London, will seek to work out Europe’s strategic response to the economic threat of rising Asian giants such as China and India.

The main theme of discussions will be “how to maintain and strengthen social justice and competitiveness in the context of globalisation, Europe’s place in the world and the security of our citizens”.

British Prime Minister Tony Blair, whose country currently holds the EU presidency, called the informal meeting to encourage brainstorming on the need for social and economic reforms in the bloc.

“What is important is the financing deal is seen as part of a bigger picture, where we are trying to move Europe forward in the direction of reform and change … to modernise its economy because we face enormous competitive challenges, from China, from India, from America, from Japan,” he said in a statement Monday.

In the run-up to the summit, Blair has portrayed the meeting as an important prelude to seeking a compromise on the 2007-2013 EU budget, which he hopes to broker in December, having blocked a deal in June.

However, expectations about the gathering are low, partly because the outgoing German and Polish leaders – Gerhard Schroeder and Aleksander Kwasniewski – will attend the summit rather than the incoming conservative leaders, but also because there is little sign that Europe’s ideological wounds are healing.

Deadlock over the bloc’s future budget and the more fundamental question of its whole future following the rejection by France and the Netherlands of the EU constitution earlier this year are expected to cloud the meeting.

The two referendums not only denied the EU its constitution, but exposed the crisis of legitimacy that the EU has with the European public.

The budget standoff is particularly urgent to the 10 countries that joined the EU in May. They need a resolution to unblock key EU funds for their still relatively poor economies.

The EU’s Common Agricultural Policy (CAP) is at the heart of the budget standoff, with Britain pushing hard for further reform of its trade-distorting payouts and France fiercely defending the CAP, of which French farmers are the main beneficiaries.

But while some still want to discuss finances, the one-day meeting will tackle the lofty subject of Europe’s future in the age of “globalisation”.

Last week, José Manuel Barroso, president of the European Commission, proposed the creation of an EU “globalisation fund” to help companies and workers displaced by the increasingly intense global competition.

Blair is expected to back the idea of such a fund when Barroso presents the new fund Thursday in a move designed to show that Europe can combine free trade with social solidarity.

However, with an eye to Thursday’s meeting, experts are warning that broader changes are still needed across Europe. They say the EU knows what reforms are needed to spur growth and meet the growing challenge from Asian giants like China and India, but fear that key states are dragging their feet due to the political cost.

“I hope that we don’t have to come to crisis in order to reform. The alternative we have to that is political leadership,” said Andre Sapir, an economist at the Brussels-based economic think-tank Bruegel.

Alasdair Murray, deputy director of London’s Centre for European Reform, says all EU countries are facing similar challenges to their social models such as ageing populations, low-wage competition from Asia, and in some places high unemployment.

“Unless EU leaders reassure voters about the future of Europe’s social dimension, they will not get public support for much-needed reforms, such as the opening of EU services markets,” he said.

“The EU should not (and cannot) become the focal point for social policy. What the EU needs is not extra rules or powers, but a new narrative that better explains, and advocates, its social dimension,” he added.

Social groups also insist that in order to achieve the EU’s goal of “social cohesion”, people – not just economic growth – must be put at the heart of reforms.

“EU leaders must bear in mind that reform must not mean abandoning the fundamental principles which are so important for a modern and cohesive society,” Anne-Sophie Parent, president of the Social Platform, an alliance of social non-governmental organisations, said Tuesday.

As people face uncertain futures with new work patterns, changing family formations and increased insecurity, Social Platform says it is crucial to ensure that changes do not jeopardise their ability to participate in society.

“What matters is that welfare states, while adapting to new circumstances, are as important as ever to translate our shared values and principles into practice – and they also contribute to competitiveness and growth if they are well designed,” added Fintan Farrell, Social Platform’s vice-president.