Time to face chilling realities after Lisbon’s feel-good glow

Date: 22/03/01

By Simon Taylor

IT WILL not just be the near-zero temperatures in Stockholm giving EU leaders a chill at this weekend's summit.

Against a backdrop of plunging high-tech stock values, including Sweden's own champion Ericsson, the warm embrace of industrial liberalisation and labour market modernisation at last spring's Lisbon summit will be as absent in Stockholm as the balmy Portuguese climate.

Sweden's ambassador to the EU, Gunnar Lund, rejects suggestions that Union leaders will draw negative lessons from the recent plunge of US markets. "The atmosphere may not be as euphoric but I think it would be wrong to live under the influence of short-term business cycles," he said.

Despite Lund's assurances, the risk for the Swedes is that this European Council will only underline the lack of progress made over the past year. In other words, Stockholm will be a stock-taking exercise.

Lisbon, by contrast, was heralded as a success after EU governments signed up to reforms designed to turn the Union into the most competitive, knowledge-based economy in the world over the next ten years.

A year on, results are proving elusive. Take energy market liberalisation. Despite pressure from the European Commission, the UK, Spain, Germany and the Netherlands to bring forward target dates by two years, French Prime Minister Lionel Jospin made it clear on his visit to Brussels this week that he will not sign up to early deadlines.

"We think that the question cannot be put exclusively in terms of fixing early dates for liberalisation," he said after meeting President Romano Prodi and the rest of the EU executive.

Officially, French politicians point to the post-liberalisation crisis in California's power market as proof that market opening can threaten supply. But in reality France's Socialist-Green-Communist coalition is unwilling to confront the country's powerful utilities unions.

Jospin blocked any target dates in the Lisbon conclusions. It is a safe bet that he will do so again on Swedish soil.

Ironically, the UK, the high priests of liberalisation, will be put in a slightly embarrassing position as allies to the French in blocking plans to free up the EU's postal market. London claims it is waiting for a study, due this summer, from the new UK postal regulator on the effects of liberalisation before reassessing its stance.

But it is clear that with a general election slated for May and the UK public's scepticism towards privatisation at a high point because of the state of the deregulated rail sector, Blair will team up with the opponents of mail market opening in Stockholm.

Despite the Commission's calls for faster movement in these fields, the danger is that EU leaders can only report on where they have got to since Lisbon rather than make new commitments.

The Swedish presidency is emphasising a broad agenda for the Stockholm summit, ranging from the effects of the EU's ageing population on pensions to the IT skills gap and biotechnology. But it is clear that getting a deal on a financial services action plan is a key aim.

Baron Alexandre Lamfalussy's call for a new fast-track procedure to meet the target of 2003 for pan-European securities market regulation has sparked an institutional battle between the EU governments and the European Parliament. Lund has ruled out member states accepting MEPs' demands for a full right to challenge legislation drawn up by the new securities committee, raising doubts about whether a meeting of EU finance ministers tonight (22 March) would break the deadlock.

Yet amid all the discussions on embracing the new economy, it seems likely that the oldest of old economies will rear its head at EU leaders' table. Heads of state and government will find it hard to avoid talking about the current crisis in the Union's livestock sector, hit by BSE and foot-and-mouth.

Swedish Prime Minister Göran Persson may have promised a more conciliatory six months after the conflicts during the French presidency. But if French President Jacques Chirac wants to put beef back on the menu at Stockholm, he may wonder who is running Europe.

Preview of the European Council, Stockholm, 23-24.3.01.