Enlarge imageBy Paul Taylor and Yves Clarisse
BRUSSELS (Reuters) - The European Union faces a prolonged crisis after its double failure to agree a long-term budget and to ratify a constitution meant to give the world’s biggest trading bloc greater political cohesion.
Of course the EU’s daily business will continue, the single market and the euro will not fall apart, a 2007-2013 budget will eventually be agreed, probably not until next year.
But Friday’s acrimonious summit has opened a period of political uncertainty and financial paralysis that will make Europe more inward-looking, less self-confident and less able to play a global role, diplomats and analysts say.
The EU’s ability to do new things, such as more active crisis management in trouble spots beyond its immediate borders or further expansion to embrace Turkey, is in deeper doubt.
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Relations between its weakened leaders are so bad and public support has shrunk so low that any new impetus may have to wait until the current generation of key actors -- German Chancellor Gerhard Schroeder, French President Jacques Chirac and Prime Minister Tony Blair -- have left the stage.
"People will tell you Europe is not in a crisis -- it is in a profound crisis," a gloomy Luxembourg Prime Minister Jean-Claude Juncker said after chairing Friday’s failed summit.
"I fear a long, creeping almost imperceptible weakening ... a disparate and blurred future that cannot be described."
British officials are proclaiming that the summit fiasco creates an opportunity for Blair to lead Europe in a different, more "modern", economically liberal direction when he takes over the bloc’s rotating presidency on July 1.
They relish the sharpening ideological clash between their free-market philosophy and what they see as an outdated Franco-German model of social and rural protection.
"It’s essentially a division between whether you want an EU that is able to cope with the future or whether you want an EU that is trapped in the past," British Foreign Secretary Jack Straw said. "It is not one that Europe can dodge."
But isolating Britain by clinging to its EU budget rebate when even the poor new member states from eastern Europe were willing to sacrifice some aid from Brussels for a deal is hardly a promising foundation on which to build new leadership.
BALANCE OF POWER
Most Brussels insiders expect both major issues on which the summit failed -- the constitution and the budget -- to move forward only after Britain has vacated the EU chair.
For the next few years, Europe will have to limp on under the convoluted Nice Treaty, widely regarded as a recipe for paralysis, after French and Dutch voters rejected a constitution designed to streamline EU institutions and provide more stable leadership and a more efficient decision-making system.
Blair appears to be counting on a gradual change in the balance of power, with new, economically more liberal leaders in Germany and several central European states, to isolate an enfeebled Chirac -- demonised in Britain as the embodiment of "old Europe" and defender of fat subsidies for French farmers.
"There was after all a Plan B after the French "No" vote. B for Blair," one EU ambassador quipped, alluding to debate during last month’s French referendum campaign on whether there was an alternative to the constitution.
British officials hope for a breach in the Franco-German axis that has long led Europe, once Schroeder -- the first big EU leader likely to go -- is replaced by conservative leader Angela Merkel in a September election.
London nurtured similar hopes when Schroeder, seen at the time as a moderniser, took office in 1998, espousing a belief in a triangular European leadership that would include Blair.
The honeymoon did not last once it became clear Britain would not join the euro single currency, the EU’s main economic project, and would align itself with Washington in the invasion of Iraq.
Despite the French "No" to the constitution, Chirac retains considerable blocking power in the EU, notably on key economic reforms such as the liberalisation of the services sector.
POST-CHIRAC, POST-BLAIR
EU insiders believe real change will have to await the departure of Chirac, probably in the 2007 French presidential election, and probably the replacement of Blair, who has said he is serving his last term.
The constitution has been shelved till at least mid-2007 since there is no prospect of France or the Netherlands ratifying it or accepting treaty changes to preserve its main provisions until after their next elections.
Blair’s entourage are pinning big hopes on French Interior Minister Nicolas Sarkozy, the leading presidential contender for 2007, described by one close ally of Blair as a like-minded "radical centrist" and moderniser.
But the irony is that Blair, the most pro-European British leader in a generation since Edward Heath in the early 1970s, is likely to be succeeded by Finance Minister Gordon Brown, who is far more Eurosceptical in tone and on substance.
Brown, an admirer of U.S. economic dynamism, displays undisguised disdain for the way the EU does business and likes to highlight his differences with his European counterparts, often even when they do not argue at the conference table.
