25 July 2011

Reclaiming the Best of the Old EU

Prospects for the Polish EU Presidency


The EU presidency is not what it used to be but one should not give up on it altogether. Such is at least the mood in Warsaw as Poland prepares to take over from Hungary the steering wheel of the Union. Interestingly, as the process of integration deepened over the years, the presidency had been gradually strengthened in its roles of management, mediation and representation. It is only since the Treaty of Lisbon that the presidency started giving up and sharing functions with the new permanent actors. Not surprisingly, the member states have had to socialise into the new setting.

 

Putting the presidency back in the picture
 


It could be argued that in some areas the process of streamlining has gone too far and the member states have lost the feeling of ownership of the EU process, of which the presidency has been an important part. The prerequisites of continuity and cohesion in a larger Union have come with a price-tag attached. The rotation of governance functions in the EU had been blamed for its growing complexity and incoherence. External partners had complained about the need to adjust to the ever-changing guard at the helm of the EU. It remains to be seen whether the problem of the EU’s disfunctionality should have been traced primarily to the rotating presidency and if the new permanent structures will solve the problem of insufficient leadership.

As the new Treaty of Lisbon set-up is tested in practice, there are continuing discussions about “recovering” the role of member states in the new institutional system through a somewhat stronger presidency. Arguments have been raised for the Prime Minister of the country holding a presidency to chair the General Affairs Council or for the foreign ministers to be the delegates of the High Representative for the different trouble spots around the world.

From the institutional point of view, the mood in the Polish government is such that the presidency should pull a few strings more than it is often assumed and that this would assist rather than undermine the new Lisbon Treaty actors, the permanent President of the European Council and the High Representative. One way to go about it has been to agree with Catherine Ashton that the Foreign Minister Radosław Sikorski will have a stronger role to play when it comes to the transformation agenda in the Arab world. When an arrangement like that comes by mutual agreement, it can help to create synergies between the presidency and the High Representative rather than weaken the latter. The practicalities of the arrangement will nevertheless still have to be worked out.

 

First things first – relaunching economic growth
 


When it comes to the agenda of its presidency, preparations started early and there is a pretty solid set of policy priorities which Poland intends to tackle. They have to do with the trio of issues stretching from economic growth on the one hand to openness and security on the other. As is often the case, they constitute not only a reading of the essential legislative challenges ahead but also a mission statement about where the country would like the EU to go.

The emphasis on new sources of growth will be a big subject for Poland. Warsaw has commissioned a World Bank study on new sources of growth which will be presented over the summer and will become the basis for a Polish white paper on the subject to be presented in September. It will have to do with both the situation of the EU economy but also with Poland’s desire to promote its case as a country which has fared well in the crisis and never went into recession. The Polish Prime Minister Donald Tusk has tended to speak about the economy at the Stock Exchange with the map of Europe behind him, most of it in red and Poland as a “green island”.

Given that the crisis in the Euro zone shows no signs of abating, the attention span of the EU leaders needs to be reclaimed for the agenda of ensuring long-term competitiveness of the EU economy. When one reads the Pact for the Euro, what is particularly striking is the secondary role of the EU-level intervention in the growth discussion. By far most of the recommendations are addressed to the member states and it is there that the action needs to be taken, in line with the letter of the Pact. What Poland sets out to do is to show that the EU-level matters for stimulating economic growth.

One key element of that agenda will be helping to relaunch the EU single market, by far the most successful project on the continent, one which is often undermined and has never been completed. The European Commission is in the process of proposing new legislation on the single market and Poland will aim to build political consensus around it. This could be more difficult than meets the eye because it is not without reason that the single market has never been completed. There are powerful interests at play and one needs to tread carefully to make sure the European value-added gains at the end of the day. The process will need to have much more visibility in the future. It will also need to be supplemented by a powerful communication campaign to make sure that stakeholders who benefit from the single market become active supporters of its rejuvenation.

Apart from dealing with the barriers to the functioning of the single market, Poland should also start a discussion about the more structural problems the single market is facing. When it comes to labour mobility, this is very often about the transferability of social insurance and pension entitlements. Such difficulties prevent the EU from enjoying more benefits of labour mobility which is a critical ingredient of the well-functioning currency union. Similarly, there are important issues which have to do with the integration of the venture capital market in Europe. Today, the average investment in an information and communication technology (ICT) start-up in Europe is 3 million dollars while in the US it is 18 billion dollars. As a result, European firms tend to migrate to Sillicon Valley when they want to reach a critical mass. The fragmentation of the capital market is one of the reasons for that phenomenon. Poland will also focus on the infrastructure of growth by tackling issues such as the modernisation of European universities. This has to do with the insufficient level of funding, especially from the private sector, lack of autonomy and too little concentration.

Finally, Poland will launch the discussions on the next EU financial perspective for the years 2014–2020. Apart from agreeing on a new EU treaty, this is traditionally one of the most heated negotiation processes in the European Union. Poland will opt for a slow start, bringing everybody into the discussion, knowing perfectly well that the window of opportunity for agreement on the entire package comes between the French presidential elections in the spring 2012 and the German parliamentary vote in the autumn of 2013. The other incentive for pushing back the crunchtime of the negotiations is the expectation that the European economy will start to pick up this year and next, hence improving the atmosphere and the economic parameters for the EU budget discussion. Obviously the risk associated with a soft start to these talks is that some strong positions will be put forward and people will start defending them forcefully, limiting the scope for the agreement. Another possibility is that the argument will start to be phrased in the context of new solidarity versus the old with the new solidarity referring to financial guarantees to the peripheral countries in distress and the old signifiying the traditional cohesion policy instruments.

 

Keeping the door open

 

Poland’s second key theme is “openness”. By this Warsaw means EU enlargement and neighbourhood. Enlargement is back on the Polish agenda.

It was a flagship project for Poland when it joined the EU in 2004 but has since fallen down the list of priorities, which is understandable, given that other political objectives of more pressing nature took precedence in the early years of Polish membership in the EU. In addition, Poland has traditionally been less present in the Balkan countries, which have been the main focus of the enlargement process, focusing instead on Eastern Europe. The prospect of the presidency has meant that EU enlargement returned to the agenda with the growing momentum for the integration of Western Balkan countries.

There are tangible results to be achieved in the next months with the prospect of the conclusion of accession negotiations by Croatia and the signing of the accession treaty as well as the launching of the talks with Serbia. Poland will need to work hard on ensuring that Turkey’s accession process moves on with the possibility of opening the competition policy chapter, provided Ankara is willing to roll back some of the state aid it extended to companies as part of the stimulus in the midst of the economic crisis. The wider issue of the borders of the European Union might return towards the end of the Polish EU presidency, especially if it is raised by France, as we get closer to the presidential elections there and as the Turkish accession process inevitably grinds to a halt.

The other crucial dimension of the “openness” agenda for Poland consists of advancing neighbourhood policy oriented towards the EU’s Eastern and Southern neighbours. Poland is traditionally more focused on the Eastern Partnership, which it launched together with Sweden three years ago. It had argued repeatedly over the years that the two neighbourhoods should be decoupled in policy terms given the different level of advancement of the reform process there. In the context of the revolutions in the Arab world and the slipping of Eastern European countries in the democracy and market economy ratings, the case for decoupling is much less powerful. On the contrary, it might be useful for the EU’s policy towards Eastern Europe to be able to point to the dynamic in the Southern neighbourhood in order to stimulate a higher level of ambition.

Warsaw will host the Eastern Partnership Summit in September as well as over twenty sectorial meetings between the EU and Eastern Partnership countries on a range of issues stretching from justice and home affairs to transport and environment. The most tangible result would be to conclude talks with Ukraine on the new Association Agreement. Deep comprehensive free trade is meant to be the key aspect of that agreement which will make it the most far-reaching one the EU has ever concluded with a third country. The negotiations are difficult given that what is at stake is regulatory harmonisation. Ukraine often gives the impression that what it wants to negotiate is a classical free trade area (FTA) with the lowering of trade tarrifs but no further changes to domestic rules of the game. Given that financial assistance is going to be of more limited scope, Kiev often feels that the incentives are not in place for a more far-reaching regulatory alignment. Nevertheless, the EU policy framework remains the best chance of inducing Ukraine to reform its governance system, which suffers from high levels of corruption and overregulation. Poland should also ensure that strong institutions of association are put in place to monitor the implementation of the Agreement which could be the more problematic part of the equation than working out its actual content.

The momentum for reform is clearly stronger in the Southern neighbourhood at the moment rather than in the Eastern one. Poland needs to advance the transformation agenda in North Africa making it a flagship project for the European Union. It is well positioned to do that on the basis of its own successful transformation in the 1990s and the lessons which can be drawn from it. The experience of Central Europe points particularly to the importance of institution-building, unleashing the entrepreneurial spirit in the economy and the role of the free media as providers of checks and balances. Even though the Arab Spring is not a re-run of 1989, Poland and other Central European countries should be in the lead of the EU’s assistance effort with the story of Europe’s own democratic transformation. Poland should also build synergies between the reform agenda in the Southern neighbourhood and what it intends to do towards Eastern Europe. There will be urgent needs to address in that agenda given the liquidity problems of North African countries requiring bridging loans and guarantees as well as the forthcoming elections which will shape the nature of the political process of transition in the immediate future.

 

Close to mission impossible – enhancing the EU’s security and defence policy

 

The third major theme of the presidency, apart from economic growth and openness, will be the security and defence agenda. The initial idea was to enhance the European Security and Defence Policy (ESDP) in the institutional and operational sense. This is what Weimar Triangle foreign and defence ministers proposed last year, going as far as to suggest that the EU should go back to the old idea of a single headquarters for its operations. This is a U-turn as far as the Polish position is concerned. Ten years ago, at the time of the so-called “praline” summit which launched the idea of a single operational headquarters, Warsaw was deeply skeptical about it, fearing that this would lead to the duplication of roles with NATO. Having become more realist about NATO itself in the meantime and warming up to what can be achieved in the ESDP, Poland is now a champion of closer security and defence cooperation.

Things look different after Libya, however. Two out of three Weimar countries do not participate in the Libyan operation and Germany even withdrew its forces and nationals from the NATO command in the aftermath of the UN Security Council vote. The dynamic is clearly between France and the UK which concluded two important bilateral treaties last year, including on the sharing of military assets. What Poland can legitimately hope to do in this context is to improve planning, agree on the optimal use of multinational forces or streamline the battle groups which have existed on paper but have never been sent to the fight. Generally, it is a worthy objective to consolidate the EU’s efforts in this field given how many resources are wasted when each member state invests in similiar if not the same assets. However, opposition to consolidation is strong and the number of stakeholders who are likely to support the process is limited. The current British government has made it clear that it would oppose vehemently anything that could be interpreted as moving towards the creation of a European army, however distant the prospect.

 

Staying ahead of the curve

 

What could make life difficult for the Polish presidency? Certainly the crises which have become an almost indispensable part of running the European Union at the current point in time. Some crises are impossible to predict, but others are almost in the cards. Greece could become altogether more problematic during the Polish presidency if the scenario of debt restructuring edges closer towards becoming a reality in that period. This process is bound to be disorderly, if not in economic, then certainly in political terms. In the area of foreign policy, the one country Poland will be watching carefully is certainly Belarus, where the economic tensions could translate into an insurmountable pressure for political change. Possible scenarios range from an organised and Moscow-backed succession to the much less likely but not to be excluded popular unrest. Should any of these materialise, Poland will be at the forefront of shaping the EU response.

Reflections about possible crises point to the fact that Poland will have to navigate with the “wind of history” rather than against the current. This can often prove to be a challenge, especially if presidencies agree their programmes well in advance and traditionally have firm views on lots of issues. The risk of considering things as “cast in stone” is real. In Poland’s case, this will be magnified by the parliamentary elections which have unhelpfully been scheduled for October/November 2011 (the precise date will be known in August). This is not Poland’s fault since the line-up of presidencies is worked out at the EU well in advance and political realities have the tendency to change in an unexpected fashion. As a result of early elections in 2007, instead of being right in-between two votes, Poland will need to hold one during the presidency.

Generally, precautions are in place to avoid any unnecessary fall-out from the election campaign, but this is always easier said than done. Those ministers who will campaign for the parliament will need to share their time between the electoral trail and the presidency. The risk is also that an overcautious approach will prevail. The government will want to avoid failure at all costs before the elections which, given its high ratings, could translate into a relatively weak leadership. This might well be closer to the Chinese method of “crossing the river while feeling the stones” rather than addressing big and powerful themes of relaunching the European Union. Finally, whatever the nature of the presidency, Poland will still need to define a political narrative for its efforts. The choice remains open but it will have to be somewhere between growth and openness.

A bold idea would be for Poland to start speaking of a new European contract between countries of the North and the South and between the different social groups in a refashioned model of growth.

All ingredients are in place for a solid presidency. In spite of the negative sentiment of decline which prevails in the European Union, the current period is formative in a number of ways. In foreign policy, it could be as important as the 1990s when Common Foreign and Security Policy was born in the hills of the Balkans. Similarly, the crisis in the Euro zone offers the hope of a stronger and more coherent governance of the economic and monetary union, provided a way is found to survive the most imminent dangers. Poland has a unique opportunity to give that historical momentum a helping hand.




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