EU project alive and kicking

Anthony Coughlan explains the divergent EU trends now present after the French and Dutch rejections of the European constitution and what the future may hold

DESPITE THE rejection of the EU constitution by voters in France and Holland the eurocrats in Brussels are carrying on much as before.

The twenty-five unelected technocrats who make up the Brussels Commission still have the monopoly of proposing EU laws to the Council of Ministers, which then makes them. So Brussels will keep churning out directives to add to the 100,000 or so pages of EU law we are already bound by.

French President Jacques Chirac's spat with Tony Blair over the next round of EU financing was a ploy to distract attention from the French people's rejection of the constitution that Chirac and his mate Giscard had hoped would consolidate Franco-German dominance of a new superstate, encompassing the twenty-five member EU.

The row was utterly bogus as there is still a year and a half to get agreement on the EU budget for 2007-2013. This is the period when Ireland will become a net contributor to Brussels rather than the net beneficiary it has been since it joined the EEC in 1973.

From then on any EU funds for Ireland will mean merely that we are getting our own money back - which has of course been the position of Britain since it joined. At the same time the Irish, like the British, will be expected to pay higher taxes to subsidise the Poles, Slovaks, Estonians, Romanians and Bulgarians, for the latter two are due to become EU members by 2007, moving the bloc from 25 States to 27.

The French and Dutch rejection of the EU constitution has brought basic differences of interest between the big EU states to the fore. Britain would like to scrap the EU's Common Agricultural Policy, which raises food prices, helps beggar the Third World and benefits mainly the EU's larger farmers.

The French are adamant the CAP must stay, for it means Britain, Germany and Holland have to pay big money to France. Ireland champions the CAP also, as Bertie Ahern and co. want to keep in with the Irish Farmers'Association, which is run by Ireland's big farmers who do well out of EU subsidies.

So Ireland clings to France's coat-tails on the CAP.

Britain wants Turkey in the EU, but France and Germany do not. Britain wants EU "widening" - that is, more new members - for it makes for a looser, more diffuse EU. France and Germany want EU "deepening", that is, further integration, which France and Germany can control, and the EU constitution was a scheme for ensuring that.

The citizens of France and Germany do not want EU rules pressurising them to dismantle their generous welfare states, privatise their public services and make their workers'jobs more insecure. Their governments do want that however, for they are in the pockets of the EU-based transational firms which desires a neo-liberal 'free'market from Estonia to Ireland, in which business can move where ever it likes and mass migration of labour from eastern Europe can undermine workers'wages and trade union standards in western Europe.

This is one reason the French and German governments supported the EU constitution, for they could then blame Brussels for undermining their national welfare and labour standards and avoid facing their own citizens' wrath.

Meanwhile, Blairite Britain and the eastern Europeans extol the merits of economic competition, while the fact that they are outside the eurozone and can control their own interest rates or exchange rates gives them a decisive competitive edge over the 12 countries that have burdened themselves with the single currency.

These conflicts are likely to worsen in the months and years ahead, as membership of the eurozone prevents its core economies from tackling the EU's 20 million unemployed, as oil prices rise and the massive corporate and houshold debt that hangs over the industrial economies from the USA to Japan to the EU, threatens a world recession.

Britain can thank its stars it did not join the euro. A common currency might be convenient for foreign holidaymakers, but people are on holiday for only two or three weeks a year, whereas they can be working in an economy with an uncompetitive exchange rate or an unsuitable rate of interest for the remaining 48 or 49 weeks - and facing joblessness, low growth and falling living standards as a result.

That is the situation of France, Germany and Italy right now. Italy could well prove to be the weak link for the euro. Its industries are in dire trouble. Even Fiat could go to the wall. Young people cannot find jobs. If Italy had not joined the euro it could have restored its economy's competitiveness by devaluing the lira. Italy's government could then have expanded domestic demand by public spending programmes.

But inside the eurozone Italy does not have its own currency to devalue and the eurozone's rules makes domestic fiscal expansion illegal and offending states subject to heavy fines. Small wonder Italy's politicians are saying bring back the lira. It could well happen and Italy could be the first to leave the eurozone.

The eurozone is made up of one currency but 12 different economies, 12 governments and 12 different tax and budget policies. Never in history has a currency union of that kind lasted long. All currencies belong to their own states and all states have their own currencies - until the euro came long. A single currency needs a state behind it to back it with a uniform tax and public spending policy. Essentially that was the purpose of the proposed EU constitution.

This was meant to turn the 25-member EU into one supranational federal state whose currency, the euro, would in time be supported by a single tax policy and budget policy. The eurocrats saw as the next and last step towards the United States of Europe that they dreamed of, a superstate they hoped would be comparable to the USA.

EU political union was meant to complement EU monetary union, and the constitution imposed an obligation on all 25 EU states to abolish their own currencies and adopt the euro as a step to that.

The revolt of the French and Dutch people has now ensured this will not happen. The EU is beginning to creak, and the strains are particularly affecting its core policies, the euro-currency and the CAP.