An “historic” European Council – in the words of French President Nicolas Sarkozy – ended on 12 December with unanimous agreement on the three main issues on the agenda: the roadmap for ratifying the Lisbon Treaty after the ‘No’ in the Irish Referendum in June; the stimulus package to counter the economic recession triggered by the financial crisis of recent months; and the ‘energy/climate’ legislative package intended to substantially reduce CO2 emissions across Europe and show leadership to the rest of the world, also with a view to reaching a global agreement at next year’s United Nations conference in Copenhagen.

On closer scrutiny, however, none of these issues were conclusively resolved at the Summit: a combination of postponements, concessions, derogations and remaining unknowns - in part inevitable, in part foreseen, and in part newly negotiated – combined to make this “historic” agreement somewhat precarious and liable to further adjustment.

On the other hand, it is indeed remarkable that, after the recent stormy months, the EU-27 were able to agree on a number of contentious issues and to set a clear agenda for next year, which is bound to be one of change both inside and outside the Union.

Irish toffees

The first issue addressed by the Summit was Ireland’s problems with the Lisbon Treaty. A total of 25 national parliaments have now ratified the Treaty, with the Czechs due to take a decision on 3 February. In the run-up to the European Council, the Irish government signalled its willingness to obtain “legally binding guarantees” from its partners - not just a political declaration, in other words, as in 2001 after the Irish voted ‘No’ to the Nice Treaty - that Lisbon would not affect Ireland’s sovereignty in certain areas, as a precondition for calling a second referendum.

At the Summit, Irish Taoiseach (Prime Minister) Brian Cowen presented what he defined “the concerns of the Irish people”. The ensuing discussions and negotiations aimed at striking an acceptable and viable balance between Ireland’s demands and the firm insistence of virtually all the other Member States that such “legally binding guarantees” would not require a re-run of the ratification procedure elsewhere. This point was made particularly forcefully by British Prime Minister Gordon Brown, in relation to both the internal political calendar in the UK (elections are due by May 2010) and the possible spill-over effects of special provisions for Ireland on the UK itself.

The final compromise, set out in the Presidency Conclusions, includes several elements that need some explanation.

The key Irish demand (that every Member State retains its ‘own’ European Commissioner) has been basically met through an elaborate mechanism whereby, if Lisbon enters into force (and only if it does, as the Nice Treaty foresees a reduction in the overall number of Commissioners from November 2009), “a decision will be taken, in line with the necessary legal procedures”, in order for the Commission to continue to include a national from each Member State.

In practice, this means that the current College (made of 27 Commissioners) could be extended by a couple of months - President José Manuel Barroso had already hinted at this option on the eve of the Summit – so that the new Commission would take office on the basis of Lisbon (e.g. from 1 January 2010). This in turn foresees a unanimous decision by the European Council to change the new provision on the College’s composition (Commissioners from two-thirds of the Member States, under a ‘perfect’ rotational mechanism). Such a decision could be taken in advance and has already been agreed anyway.

A sequence of mutual obligations and concessions, in other words, is designed to ensure that Ireland ratifies Lisbon as a precondition for preserving the 1x1 rule. The onus here is primarily on Dublin, although - to make things easier (and meet other demands coming from the European Parliament) - the current Barroso Commission could continue to operate until December 2009.

Interestingly, however, at the final press conference, President Sarkozy explicitly said that, in his view, asking Member States to give up on both the traditional rotating Presidency (as foreseen by Lisbon) and permanent representation in the Commission was “way too much”. The Irish request was therefore not only understandable, but also agreeable to most other Member States, big ones included, as it would confer more legitimacy on the College while not altering its current modus operandi significantly. The objections expressed especially by the Benelux countries - keen on a smaller and leaner Commission - were thus overruled, although this issue would resurface in the event of a second ‘No’ in Ireland.

As regards the other “legally binding guarantees”, Ireland will get them on three points - taxation, neutrality, and family-related and ‘ethical’ issues - but not on the fourth it had raised (workers’ rights), also probably due to British resistance (the UK has its own opt-out clause on the social chapter).

The Presidency Conclusions specify that these issues will be addressed in a way designed to prove satisfactory to both Ireland and the other Member States, and only if the Irish government commits itself to pursuing the ratification of Lisbon by the end of the current Commission’s mandate (31 October 2009).

The sequencing of decisions is even trickier in this context, as the incoming Czech EU Presidency is expected to carry out follow-up work on this deal, with the overall mechanism finalised only in June 2009, after the European Parliament elections. Getting agreement on the small print could prove challenging, especially if other Member States see it as an opportunity to reopen negotiations on issues (‘ethical’ or foreign policy-related) settled by the Lisbon Treaty.

The prevailing interpretation of the deal reached at this Summit is that “legally binding guarantees” on the three points mentioned above will be incorporated in a special Protocol for Ireland (and Ireland only) that would be attached to the Accession Treaty with Croatia – likely to be negotiated in 2010 – following the model adopted for Denmark in 1993 (its special “guarantees” were incorporated in the 1997 Amsterdam Treaty).

Some diplomats, however, expressed concern that this could turn into a loophole for reopening the Pandora’s box of past Intergovernmental Conferences - and the remarks made by some leaders at their ‘national’ press conferences did little to allay such concern.

Last, but not least, a number of procedural decisions have been adopted - and included in separate Summit Declarations - regarding all EU institutions with a view to the possible transition from the Nice to the Lisbon Treaty next year (and beyond).

The next Commission President will still be chosen right after the European elections; i.e. at the June 2009 European Council. The Council Presidency will continue to be exercised by the country in office if Lisbon enters into force during its semester, and its successor will be responsible for adopting “the concrete measures necessary for the exercise” of both the new Presidency of the European Council and the Council for Foreign Affairs, in close consultation with the newly chosen holders of those posts (as foreseen by Lisbon).

In practice, this means that the EU will still have a fully-fledged rotational Presidency in the second half of 2009 even if Lisbon enters into force before the end of the year, and that immediately thereafter Spain would take up the crucial role of preparing for the actual implementation of Lisbon – the role that France expected to play itself had the Irish voted ‘Yes’ in June.

An interesting footnote concerns the size and composition of the European Parliament. It is likely to be re-elected on the basis of the Nice Treaty (which foresees a total of 736 MEPs) but may then move on to Lisbon (751, including the President) – a scenario which has already raised a number of intricate issues regarding national constituencies, especially since some Member States would see their allocation of MEPs either shrink or grow within the parliamentary term.

The Summit thus decided that, if and when Lisbon enters into force, the overall size of the next Parliament will rise to 754 – a number which reflects a specific German demand. Under Nice, in fact, Germany is entitled to 99 MEPs, whereas Lisbon foresees 96. To avoid having to ‘dismiss’ three elected MEPs (and finding a system for doing this), Germany will now be allowed to keep 99 until 2014 – when a new allocation of seats will probably have to be in place anyway, in the wake of Croatia’s (and possibly Iceland’s?) accession.

To sum up, much still depends on Ireland, and the roadmap to Lisbon remains fraught with unknowns, although the situation is clearer than six months ago. Even after the Summit, Dublin gave no indication regarding a possible date for a second referendum (although it is widely assumed that it will take place in October 2009), or even refer explicitly to a second referendum. But a ‘Yes’ vote – replicating the 2000/2001 Nice Treaty precedent – is far from assured, not least because of the gloomy economic situation in Ireland. On top of that, both Sinn Fein and Declan Ganley (whose new EU-wide party, Libertas, has just opened an office in Brussels) have already declared that the sweeteners obtained by the Irish government at the EU Summit are insufficient, and now plan to intensify their campaign against the Lisbon Treaty, starting with the June European elections.

The economic stimulus package

The economic stimulus package was not, in fact, a major source of discussion and negotiation at the Summit itself. The Commission had already presented a draft text in late November, which basically collected together the various national plans to counter the economic downturn: very bold in the UK (badly hit) and Spain (suffering badly too, but with wide budgetary margins for intervention), bold in France, modest in Germany (for the time being), and very limited in Italy (with no budgetary margin whatsoever) and most new Member States (partly out of choice and partly out of necessity).

The Commission also put on the table some €5 billion resulting from savings in the agricultural budget, a general simplification and acceleration of procedures for spending Structural Funds, language on the possibility of reducing VAT in some sectors, and a reference to €30-billion worth of European Investment Bank interventions over 2009/10 for small- and medium-sized enterprises, renewable energy and clean transport projects.

But the main salvos had been fired on the eve of the European Council, and resonated right across the EU – with France criticising Germany for not doing enough and for opposing VAT reductions, Germany criticising the UK for having changed policy overnight and squandering money with no consideration for future generations, and the Commission trying to minimise and contain the rifts.

In the end, the emphatically labelled ‘European Economic Recovery Plan’ - vaguely (and inappropriately) reminiscent of the 60-year-old ERP (the US-sponsored Marshall Plan) - was agreed by the Summit, with much emphasis on the overall amount of up to €200 billion, equal to roughly 1.5 % of the EU’s GDP.

In fact, however, this “plan” is still mainly the sum of national (uncoordinated) measures: some Member States are not yet able to assess the gravity of the downturn and therefore want to keep at least part of their firepower in reserve for a possible worsening of the situation in 2009.

This is the case with Germany - by far the biggest manufacturing country in the EU. A combination of economic ‘orthodoxy’ and political tactics (particularly relevant in an upcoming electoral year) has so far limited Berlin’s anti-cyclical intervention to €32 billion over two years. But the Grand Coalition is considering the possibility of a more substantial package in January 2009 or later, depending on a number of variables. Germany’s concerns are also related to the over-arching issue of budgetary consolidation in the euro zone - of which Berlin is now an unequivocal champion again - and to the stability of the euro itself.

Finally, there are also great expectations of new developments across the Atlantic, as the new US administration is likely to take a new and possibly dramatic approach to tackling the global crisis which began in Wall Street. Indeed, Barack Obama was – in this as well other policy areas – the elephant in the EU Summit room.

This may also help explain why, traditional differences over policy tools and priorities notwithstanding, the key decisions over possible VAT reductions have been postponed to the March European Council. Some labour-intensive sectors (especially construction) may end up getting special (and probably time-limited) rebates, but no guarantee has been given yet, and the debate is bound to continue – especially across the Rhine – well into the new year.

Climax on climate

The most contentious issue at the Summit was the energy/climate package. It was predictable that, following the changed economic situation, a number of Member States would raise both general and special demands on the blueprint for reaching the “triple 20”  by 2020 objective presented by the Commission in January.

In fact, only Italy’s Prime Minister Silvio Berlusconi went public in the plenary session to air his preference for a postponement of the whole package, and was immediately rebuffed by German Chancellor Angela Merkel. After that, Hungary’s Prime Minister Ferenc Gyurcsany apparently presented his country’s demands as “non-negotiable”, to be immediately rebuffed, this time by President Sarkozy.

Specific negotiations led by the Presidency thus started with individual countries in the margins of the Summit to bring together a number of targeted concessions and derogations that would allow for an overall consensus on the substance of the package to be reached without nocturnal marathons or additional extraordinary summits (Paris had threatened to hold one on 29 December if this Summit failed to reach agreement!).

This proved effective and, in the end, an elaborate deal was finalised encompassing a mix of direct financial support measures (the “solidarity” that Poland and other new Member States asked for to sustain the restructuring of their still heavily carbon-based energy sector without penalising consumers); derogations from the Emissions Trading Scheme and the auctioning system underpinning it (to the benefit, once again, of Central Europeans but also of Italy and Germany), plus a specific review clause (for the ETS Directive) and a more general ‘rendez-vous’ clause stating that the whole package would be revisited by June 2010; i.e. after the conclusion of the UN Conference in Copenhagen.

The latter has been interpreted by some Member States (e.g. Italy) as paving the way for a further dilution of the package and its objectives in the event of a failure to reach a global agreement on tacking climate change. But the Commission has emphasised that, in light of the results of the Conference, it could lead to even more ambitious goals being set.

On the whole, however, it is legitimate to say that the original ambitions of the Energy Policy for Europe launched in March 2007 - under the German Presidency - have been substantially preserved, despite some tactical and technical concessions to specific interests (some more justified, some less so).

As President Sarkozy pointed out in his final press conference, Europe remains the only “continent” to have set itself such wide-ranging climate change objectives – at least so far. The ambition to lead by example has not been significantly dented (yet), but is still dependent on what commitments the other major polluters are ready to give, as the concern about defending the competitiveness of Europe’s manufacturing sector in international markets has grown in importance with the economic downturn.

Here again, the European Council deliberated while still in the dark about the intentions of the incoming Obama administration. At the UN Conference in Poznan (Poland) which coincided with the EU Summit, Senator John Kerry, speaking on behalf of President-elect Obama, made it clear that US policy in this area will change radically and rapidly, and that America aims to become the world leader in new environment-friendly technologies. When informed about the outcome of the European Council, he praised the Union’s determination and indicated that there would be room for a convergent effort across the Atlantic. In the same vein, at the end of the Summit, President Barroso articulated his hope that Europe could convince America to move in the same direction by saying to Obama (and others) “yes you can”.

However, the energy/climate package is not final yet. It now goes to the European Parliament, where a vote is planned for 17 December. The two main groups - the European People’s Party and the Party of European Socialists - have already given a positive evaluation of the outcome, describing the deal as a “balanced” one which takes adequate account of a number of different interests and concerns. This may mean that, in the end, only minor amendments will be made to the Summit deal and that, when President Obama is sworn in on 20 January, the EU will also be able to say “yes we could” – at last.

The ‘hyper-presidence’

When Nicolas Sarkozy and his government took over the EU chair in June, they were regarded with a mix of scepticism and hope.

Scepticism because the previous French Presidency, at the end of 2000, had been far from brilliant; because the failed 2005 referendum on the Constitutional Treaty had inflicted  serious scars both inside France and across the EU; and also because the shock of the Irish ‘No’ right on the eve of the French semester had disrupted President Sarkozy’s initial plans (and ambitions), to the extent that the ensuing new list of priorities (defence, immigration, energy and climate, the Common Agricultural Policy health check, the Union for the Mediterranean) appeared at the same time poorly focused and liable to pave the way for an over-assertive ‘national’ agenda.

But they were regarded with hope, too, because of the solid experience and competence of French officials and the notorious energy of the new French President, seen by some as capable of steering EU affairs forward and injecting new momentum into a depressed Union.

In retrospect, all-in-all the optimists have been vindicated. The several crises that have hit the Union since July - the conflict in Georgia, the financial turmoil, the ensuing economic recession - have turned into opportunities to energise the EU as a whole, spur joint action, forge common positions, and deliver on often tricky and controversial policy issues.

A record number of summits have been convened, at various levels and in different formats, and “Europe” has been seen worldwide as a dynamic player, constructive partner, and effective crisis manager – thanks also to the apparent (and growing) weakness of a US ‘lame duck’ president.

The main ingredient of President Sarkozy’s and France’s successful semester has been a unique combination of political energy (the French call it volontarisme) and policy pragmatism. Apart from the relentless ‘summitry’ and the innumerable bi- and mini-lateral meetings organised by Paris, President Sarkozy has displayed a remarkable – and almost un-French – degree of open-mindedness and adaptability in terms of action and reaction to unexpected events and developments.

This was the case with the decision to take up a mediating role in Georgia, exploiting France’s good relations with both Moscow and Tbilisi, and its virtual “double hat” as EU chair and permanent member of the UN Security Council. Whatever one may think of the root causes of, and triggers for, the August crisis, Paris managed to stop the conflict and create a framework for diplomatic negotiations, filling a striking international vacuum. It also prevented the EU-27 from splitting over relations with Russia (as they had over the war in Iraq in 2003) and bought precious time for the wounds to start healing and new approaches to emerge – also in Washington.

This was mostly the case too when the financial crisis erupted in September-October. When the EU began to be hit by bank failures, President Sarkozy’s activism generated a flurry of top-level meetings: some ill-prepared and therefore doomed to fail (the G4 on 4 October); some timely and focused (the euro-15 plus Britain on 12 October); and some mainly aimed at keeping the ball rolling and extracting commitments from other players (the G20 in the US). While this crisis management may have been conducted mainly by trial and error, France’s readiness to consider and take on board new ideas (from London, in this case) and to project them onto the EU as a whole (at the mid-October European Council) and the rest of the world, was remarkable.

In the same vein, the Presidency’s determination to react quickly and decisively to the impending economic recession has prompted other Member States to do the same, although this has not translated into a centrally coordinated anti-cyclical package. Still, the European Central Bank has acted in unison with both sister institutions worldwide and the demands of EU governments, showing a flexibility it was not credited with beforehand.

Occasional spats with some capitals have often been balanced with concessions and derogations to appease them (e.g. on the energy/climate package) in order to seal a comprehensive deal at the Summit and declare victory.

There have also been also a few slips and faux pas along the way: President Sarkozy’s proposal to somewhat institutionalise euro-zone summits at Heads of State and Government level was ill-received not only by Germany but also by the ECB, the Commission, the Eurogroup’s chairman Jean-Claude Juncker (traditionally an ally of France), and the Czech government.

Too forceful conduct of certain negotiations - on the CAP, some aspects of defence policy, the Union for the Mediterranean, or the pact on immigration and asylum – reawakened old fears about France using the chair to pursue national interests, but generated stronger resistance than in the past, thus leading to modest results.

In a way, whenever and insofar as France has tried to impose a national agenda onto its partners, it has mostly failed – but whenever and inasmuch as France has managed to combine the two, it has mostly succeeded.

It is also fair to say that - not unlike 2000 - this year’s French EU Presidency has put Franco-German relations under enormous strain. President Sarkozy’s characterisation of Chancellor Merkel as “Madame Non” best epitomised the difficulties between Paris and Berlin, although tensions have been mostly contained and ring-fenced and have not spilt over into other dossiers (e.g. NATO, relations with Russia).

The lack of mutual sympathy between the two leaders has been apparent since ‘Sarko’ entered the Elysée. It is due also to big differences of personality, method and style, which tend to exacerbate differences of policy. Yet it is all the more surprising given that they belong to the same political family, the same generation, and come from the same pragmatic mould. The fact that Berlin is constrained by a coalition of rivals and approaching a long domestic electoral campaign has hardly helped. Still, the two leaders are likely to remain on the EU stage for at least a while longer and may therefore have to find a better modus vivendi.

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Equally striking has been President Sarkozy’s growing entente cordiale with Gordon Brown. This seems to have been triggered by the British Prime Minister’s policy U-turn since the credit crunch hit the UK and their common interest in developing a strong response to the crisis. But there have also been important developments in Franco-British cooperation in the EU security and defence arena, although they have been downplayed by both sides (strangely so, given the recent 10^th anniversary of the famous St. Malo Declaration with which Tony Blair and Jacques Chirac launched it in the first place).

During his final press conference, President Sarkozy half-jokingly hinted at having made “new friends” during the semester, and the international media has been full of analyses of the new EU odd couple and/or German-British recriminations. However, the impression at this stage is that the convergence between Paris and London is still mainly tactical and quite fragile, considering also the big unknowns over Mr Brown’s tenure at 10 Downing Street.

Finally, President Sarkozy has so far succeeded in filling two important gaps he had inherited from his predecessor. First, he has broadly reconciled the French public with Europe, in part by showing that the EU is an appropriate format for addressing global crises and in part by conveying the idea that Europe could once again be – as it appeared to be often in the past – a sort of ‘France writ large’, a forum in which French interests, values and faces can be brought to bear effectively.   

In a way, ‘Sarko’ has been seen as being at the same time liberal, protectionist, Keynesian, colbertiste, nationally-minded and multilateralist – a mix that may not be sustainable in the longer run, but that served him (and the EU) well during the semester. This also helps explain why his domestic opponents are in spectacular disarray - on both right and (especially) left – confronted as they are with a powerful and energetic leader who seems to be able to ‘occupy’ all political and ideological spaces.

Secondly, President Sarkozy has also managed (at least in part) to reconcile France with the new EU Member States: he has listened to their demands and mostly delivered on them; he has canvassed and cajoled their leaders, often combining political pressure and formal recognition. The Baltic states may still be a bit unhappy with his handling of Moscow, and the Czechs may still harbour some suspicions that he intends to effectively extend France’s EU Presidency well into their semester. On the whole, however, the balance sheet comes out on the positive side, and President Sarkozy has shown how important (and useful for all) it is to have a strong and stable leadership for the Union.

This has probably been his most important contribution to the Lisbon ratification process, although it has come at the price of sidelining existing EU bodies and institutions and running the EU as a one-man-show. The set-up foreseen in the Lisbon Treaty, however, is definitely more balanced in this respect and offers broad guarantees to all.

Czech in

The Czech Republic is not the first new Member State to take the EU helm – Slovenia did so earlier this year. It is not the first non-member of the euro zone to do so either - Sweden, Denmark and the UK came first. Nor is it the first EU member to take over the Presidency during a treaty ratification process without having done its homework first. Finland ratified the Constitutional Treaty during its 2006 term, despite the “pause for reflection” following the French and Dutch No’s. It is, however, the first former member of the Warsaw Pact to lead the EU – but, per se at least, this should not play an important role during the semester.

So why are there so many concerns about the incoming Czech Presidency? The reasons are manifold. First, Prague comes after Paris and it will be a tough act to follow. Second, the Czech Presidency comes at a difficult time both internationally and internally: ironically, the respective roles of the EU and the US may be reversed soon, with a new US administration keen on (gradually) presenting and imposing its own agenda on the world, and all the EU common institutions (progressively) coming to the end of their current mandates. This could well make the EU a ‘lame duck’ and put Prague on the spot.

Last, but certainly not least, the Czech government has a majority of just one vote in Parliament, recently lost elections for the Senate and regional bodies, and is internally divided, especially over Europe. The main coalition partner, the ODS, is torn between the followers of Czech President Vaclav Klaus - who never misses an opportunity to present himself as Eurosceptic and anti-Lisbon – and a more moderate wing, while the Greens of Foreign Minister Karel Schwarzenberg and (to a lesser extent) the Christian Union are more pro-EU.

This could paralyse the government in the months to come and lead to further confrontation with the opposition. Prime Minister Mirek Topolanek barely escaped a vote of no confidence just a few weeks ago, and was painfully confirmed as head of the ODS on the eve of the EU Summit. These are not good omens for the Czech Presidency, as they would not be for any other Member State in a similar situation.

To make things worse, the Prime Minister has tabled the parliamentary vote on Lisbon (recently made possible by a ruling of the Constitutional Court) for 3 February, at the same time as the vote on a treaty with the US on missile defence, to allow a radar system to be based on Czech soil. The latter is highly unpopular in the country, and may also be rendered somewhat less relevant if the Obama administration decides to put the missile defence project in a slower lane (or even on ice) for a while.

The problem is that the vote on the radar will be taken before the one on Lisbon, and Prime Minister Topolanek has made it clear to both the Eurosceptics in his own party and the Social Democratic-led opposition that the two are linked: if the first fails (and the opposition is fiercely against it), there will be no vote on Lisbon. It is easy to imagine what repercussions this could have at the EU level – on the Presidency’s credibility and effectiveness, and also on Ireland.

This (big) unknown apart, however, there is no reason to doubt that Prague will be able to run EU affairs at least as smoothly as Slovenia did. The Czech Finance Minister will be invited to the meetings of the Eurogroup, G8 and G20, and the entire government – under the coordination of Vice Prime Minister Alexandr ‘Sasha’ Vondra - will rely on the support of the entire Commission (especially in the run-up to the March Summit) and the High Representative Javier Solana, both somewhat eclipsed from the EU radar screen during the French Presidency.

The calendar for the first half of 2009 is full of ceremonialengagements, summits and anniversaries. The planned G20 meeting in London on 2 April and the ensuing NATO 60th Anniversary Summit in Strasbourg/Kehl will probably prompt Barack Obama’s first official visit to Europe - and provide an opportunity for Messrs. Brown and Sarkozy (in light also of France’s expected reintegration in the Alliance’s military structures) and Chancellor Merkel to play their own autonomous diplomatic role. EU bilateral summits with both Russia and the US are also scheduled later in the Spring, and these will be run by the Czechs – along with the planned celebrations for the 20^th anniversary of the collapse of the Iron Curtain.

But the grand finale, for the EU and for Prague, will be in June, with the elections for the European Parliament and the ensuing EU Summit that is expected to finalise a number of important decisions for the future of the Union. The groundwork has been laid at this December Summit – but much remains to be done.

Click here for the Presidency Conclusions of the European Council.