By John Rossant
The formal conclaves held by the leaders of the European Union every three months are often long on rhetoric and short on the decisions that could really make a difference in how the world's largest economic region is managed. But the EU Summit in Barcelona on Mar. 15-16 could be a pleasant surprise.
Governments will probably agree to pry open Europe's gas and electricity markets wider than ever before. With the likely adoption of rules to simplify initial public offerings, the elusive goal of a unified European market in financial services could come a step closer to reality. And for the first time, EU states will take a hard look at the $40 billion in subsidies doled out to farmers year in, year out--subsidies that gnaw away at the finances of every state in Europe. All are steps that will help make the EU more competitive. They help fill what the European Commission calls the "delivery gap" between EU promises and real reforms.
But something else is distinctive about this summit: It's not the French and Germans who are pushing for change. From its inception, the EU has been an instrument--some would say the plaything--of France and Germany, the two biggest economic and political powers on the Continent. Statesmen like Francois Mitterand of France and Helmut Kohl of Germany once set the course of EU policy--and often artfully arranged things to benefit French and German industrial champions. Now, countries once at the political and geographical periphery are driving the pace of reform. Draw a line from London to Madrid and across the Mediterranean to Rome: That's the new axis of power in the EU.
If there's a positive story to tell in Europe these days, this is it. It's the leaders of Britain, Spain, and even Italy who are backing the new proposals at the summit--and ignoring traditional party divisions. In the process, Labour's Tony Blair has found his ideological soul mate in Jose Aznar, the head of Spain's center-right. The kind of competitive, market-friendly EU that both men want to see is enough to make any French dirigiste recoil in horror. Even Italy's Silvio Berlusconi is making all the right noises about wanting to hitch up with Blair and Aznar, who recently spent a weekend together--where they came up with a solution to the once-intractable problem of Gibraltar. In mid-February Blair and Berlusconi issued a joint call for a radical deregulation of labor markets.
You would expect the French and Germans to reassert the power of their duopoly. But it may not happen. The Franco-German alliance was a marriage of convenience, built in part on the French ability to leverage guilt over World War II to make the Germans dance to a French tune. Besides, there was no one else to run the show. The British were out of the running because of their ambivalence about European unity. Italy never pulled its weight in EU councils: Rome just seemed glad to cash billions in EU farm subsidy checks. And Spain? It hardly seemed to matter.
All that has changed dramatically. Germany, united a half-century after the end of World War II, is increasingly looking out for its own interests and ignoring the counsels of the French. Under Blair, the British have come closer to the Continent than ever before, and adoption of the euro is within sight. Berlusconi has broken decisively with Italy's sotto voce tradition in Europe, speaking up on such issues as the need for an aggressive EU foreign policy and deregulation. The white-hot pace of growth and reforms in Spain means Madrid now has a seat at the EU big boys' table. Aging European political leaders "don't have enough faith in the public to push to new horizons," says Gerd Schulte-Hillen, chairman of the supervisory board of German media giant Bertelsmann. "Aznar is an example of how it can be different."
Tant pis, Paris. Bureaucrats in Paris and Berlin will have to make some adjustments. The cozy, ordered world in which state-owned Electricite de France could zap its way into deregulated neighboring markets--without submitting to deregulation at home--no longer exists. Germany's hyper-regulated social economy is being attacked from all sides. Once, France and Germany imposed their vision on the rest of the Continent. Now, the tide is changing: Europe's outer ring is dragging France and Germany into the globalized age. And the sooner it happens, the better. Rossant covers European politics from Paris.