September 4, 2003	Thursday	Rajab 6, 1424

BRUSSELS: European Union policymakers seeking some respite after a scorching summer are likely to be disappointed. With economic and political woes piling up across the bloc, the EU’s back-to-business autumn agenda looks set to generate almost as much heat as the fires which ravaged many parts of Europe in July and August.

Worsening finances in France and Germany have cast a pall over the 12-nation eurozone as Europe’s one-time turbo economies once again flout eurozone monetary rules — and show no remorse about it.

The spectre of corruption and financial mismanagement has once again reared its ugly head in Brussels, with European Commission President Romano Prodi squirming under charges that he failed to act faster against allegations of fraud at Eurostat, the bloc’s powerful Luxembourg-based statistical agency.

And after months of discussion on a new EU constitution, Italian Prime Minister Silvio Berlusconi — whose country currently holds the bloc’s rotating presidency — will launch an inter-governmental conference in early October to finalize a treaty meant for a soon-to-be union of 25 states.

It’s the grim economic outlook, and especially the dark shadow cast by France and Germany over the eurozone stability pact — that is giving EU governments the fiercest headache. After months of playing coy about the state of their country’s finances, French officials have finally admitted that the national budget deficit will hit four per cent of GDP this year, clearly breaching the eurozone budget deficit limit of three per cent.

France’s sombre announcement came only days after German Finance Minister Hans Eichel acknowledged that Berlin would run up a budget deficit of 3.8 per cent of GDP in 2003. Both countries also overshot the stability pact threshold last year and look set to repeat the exercise again in 2004.

Open defiance by the eurozone’s leading economies represents a tough challenge for the commission whose officials are duty-bound to apply the rules which appear simple enough, at least on paper. Countries which renege on their eurozone commitments for three years running can face millions of euros in financial penalties — not to mention intense political embarrassment.

Prodi has valiantly vowed to bring Paris and Berlin to heel if needed, but most euro-watchers are convinced that the commission is unlikely to challenge two of the bloc’s most politically powerful nations. This is beginning to seriously irritate smaller eurozone members which have fought hard to bring their finances in line and see no reason why the big guys should get special favours.

Swedish Prime Minister Goran Persson, whose country will vote on joining the euro on September 14, has lashed out against France and Germany for undermining the credibility of eurozone rules. The eurozone’s economic troubles have also been seized upon by Swedish opponents of the euro who argue that Sweden is doing better outside the currency bloc.

EU officials are also fretting over the Eurostat financial scandal which many fear could end up wreaking the same political havoc as allegations of corruption and fraud which led to the shock resignation of the previous European Commission in 1999. Prodi, who took over as commission chief in 1999 with a pledge to clean up the EU administration now stands accused of having turned a blind eye to reports of widespread financial irregularities at Eurostat.

Key officials at the agency have already been sacked and Prodi has promised further quick action if needed. But the European Parliament, scenting blood — and facing elections next June — is determined to secure the most political capital from the affair and to grill Prodi and other commissioners throughout autumn.

Inter-governmental discussions on the new EU constitution look set to be equally bad-tempered. The draft treaty drawn up by former French president Valery Giscard d’Estaing has already caused fireworks, including over suggestions that the bloc should have its first-ever permanent chairman instead of the current system of rotating six-monthly presidencies.

Smaller EU states and future members from central and eastern Europe are strongly opposed to Giscard’s calls to reduce the number of commissioners, saying each country must have its representatives on the EU executive. They are also determined to keep the current rotating presidency, arguing that without their turn in at the EU helm, smaller nations would be sidelined even more in an expanded Europe.

Meanwhile, a recent call by Pope John Paul II that Christianity should be formally established as the spiritual basis of the future EU constitution is expected to spark another round of heated debate. Giscard’s draft constitution refers only to Europe’s religious and moral roots, with many in the bloc insisting that the EU must not cold-shoulder its Jewish and Muslim populations.

The summer did bring one important breakthrough, however. After weeks of tense German-Italian relations following Italian Premier Berlusconi’s description of a German member of the European Parliament as a Nazi camp guard, Berlusconi and German Chancellor Gerhard Schroeder have finally made up. Schroeder had earlier cancelled his private summer holiday in Italy after the former state secretary for tourism, Stefano Stefani, insulted German tourists. Stefani has since resigned and Schroeder last month accepted an invitation by Prodi to attend an opera in Verona. Whoever said Europeans aren’t good sport?