FEAR AND LOATHING IN PARIS AND BRUSSELS / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( A MUST READ )

Fear and loathing in Paris and Brussels

By Wolfgang Münchau

Published: September 19 2010 20:18

A few years ago I talked to Lord Dahrendorf, one of the great intellectuals of his time, about Europe’s failed constitutional treaty. He told me not to worry. The European Union was at least in a position to produce a proper crisis. It could be worse.

Last week’s European summit reminded me of that conversation. It was marred by an ugly headline-grabbing spat between Nicolas Sarkozy, the French president, and José Manuel Barroso, president of the European Commission, over the French deportations of Roma. It was a fight that clearly showed the limits of the Commission’s powers when faced with a determined national administration.

Along with a decline in enthusiasm for European integration, we are also observing a loss in Europe’s global influence. In view of the rapid economic development of China and India alone, a relative decline of the EU is both inevitable and perhaps even desirable. The important question for Europeans is not how to stop this decline but how to manage it. You can decline with a clear sense of direction. Or you can decline with fear, panic and anger, the predominant emotions at European summits these days.

What lies behind all the anger that is coming out of the European Council? The Sarkozy-Barroso show last Thursday was partly a deflection from a chronic inability to solve problems at the interface between the EU and its member states.

You might recall that this was the summit supposed to make significant progress on economic policy co-ordination and better surveillance of fiscal policy. The spat certainly deflected attention from the abysmal failure of the taskforce headed by Herman van Rompuy, the president of the European Council, to come up with an intelligent and coherent governance framework for the eurozone. Unable to reach agreement, leaders produced a very European diplomatic éclat.

But what I find most disturbing is the return of the policy of blame. Wherever you look in the EU, politicians have become more assertive in blaming minorities and immigrants, other governments and, of course, “Brussels”. We have seen the rise of a strong anti-immigrant party in a country as open-minded and civilised as the Netherlands. Even in Germany, which has so far resisted the lurch towards rightwing populism, opinion polls show the potential for an anti-immigrant party to win as much as 30 per cent of the vote. The most shocking part about the recent affair surrounding Thilo Sarrazin, a board member of the Bundesbank, is not that he espoused racist theories but the immense public support he enjoys. He has now resigned from the Bundesbank, but I wonder what he might do next.

While European democracy itself is in no danger, the rise of anti-immigrant and separatist parties is one of several indicators of the direction in which European society is moving. It is no surprise that desperate politicians are exploiting those sentiments to their own narrow advantage. And none of them is at present more desperate than Mr Sarkozy. In Brussels last week we may have witnessed the beginning of the French presidential election campaign.

Mr Sarkozy’s presidency has failed to deliver most of the reforms he promised three years ago. Probably his only chance of re-election in 2012 is some phoney war behind which his electorate can rally. The European Commission is always an easy target, especially with a president such as Mr Barroso, one of the few politicians whose vanity rivals that of the French leader.

For Mr Sarkozy, blaming Brussels may yet work politically. The latest opinion polls already point to an extraordinary degree of euroscepticism in France. According to a study co-authored by the German Marshall Fund, more than 60 per cent express unhappiness with the euro – a higher proportion than anywhere else in the eurozone.*

You could certainly not justify this result on objective economic grounds, since France has done relatively well inside the eurozone. You can blame the adoption of the euro for the economic malaise in Ireland, whose crisis is growing worse by the day, but not in France.

So what might be the next incident to inflame French national sentiment? Another accident waiting to happen is for France to lose triple-A status on its bonds, something I expect to happen eventually. Given Mr Sarkozy’s failure to consolidate fiscal policy before the crisis, a presidential election campaign ahead that is unlikely be accompanied by austerity, and the lack of a medium or long-term fiscal framework, France can count itself lucky for each day it hangs on to its present rating. A downgrade would be a shock, financially but also politically. While I cannot predict what will happen, I would expect the reaction to be fierce.

So the late Ralf Dahrendorf was right: Europe still has an undiminished capacity to produce crises. The talk about European irrelevance is misguided. The European debt crisis was – in fact, remains – a large global shock. The problem is not so much that Europe might or might not become irrelevant, but that Europe’s relative decline is going to be both noisy and nasty.

* Transatlantic Trends 2010, www.gmfus.org

Copyright The Financial Times Limited 2010.