Brussels - Frankfurt: a science fiction movie on stage

By Inna Rogatchi

On the eve of the EU enlargement the battle of ideas for reform of the European Union is gathering pace. The European Central Bank has become one of the first battle grounds of controversies among the EU candidate countries and present Member states.

S. Tulenev, Chas

Newly elected and colorful member of the Finnish Parliament Tony Halme after his recent visit to Brussels with a delegation of the Finnish MPs has said that his impression from the EU headquarters is like that one of “science-fiction movie on stage, not a real life”. Many observers would agree with this. At the eve of the massive EU enlargement next year, situation inside its institutions looks like people inside the EU enjoying their own life being completely isolated from the real life behind ‘the Brussels’ walls. The EU bureaucrats are making such a strategy of development as if it has nothing to do with lives of 350 million of Europeans placed under “the EU umbrella”. As if they are trying to solve their own internal problems by their own standards according to very artificial set of values which are quite far from the present states’ real interests. 

Unique stratification in the EU

Since the start of the European Union’s constitutional convention on February 28^th, 2002 the previously balanced structure of power within Community institutions has been under serious and increasing threat. Now, some officials and experts involved in the Convention’ work are beginning to understand that many EU Member States, first of all, small countries, may fell victims of the main strategy line of the French-led and inspired Convention, which, most probably, could transfer the EU into a two-level organization. On the first level there would be big countries, i.e. France, Germany, and Britain; the latter only to some extent, so far, as Conventional intent does not meet enthusiastic support of British population. Spain and Italy would stay somewhere in the middle and the EU leadership and that of Convention would try to use their support when needed. On the second level would be all the rest EU member states. In practice it will mean unprecedented stratification inside the EU. The massive enlargement in 2004 makes this tendency even more dangerous, as all new Union member states, except Poland are, in fact, small countries.

Former Finnish Prime Minister Paavo Liipponen and Finnish MPs representative in Convention confirmed that the Convention’s initial inception has been to make it an advisory body with the aim to assist in creating future EU constitution, and to formulate the EU’s long-ranged strategy. “We still believe that this purpose should come true; the Convention delegates should not deceit their competence; and they should not impose policies and changes, whatever dramatic and radical, neither on the EU Commission, nor on the EU Member States”.

Silent revolution in the ECB

The convention’s ideas concerning the EU’s transformation deal with all aspects of the EU functioning, e.g. from finances to the decision making mechanisms.

As for the financial policy, the EU small countries have lost already the most serious battle in this regard. It happened at the end of 2002 when the European Central Bank –ECB’s decision was reached according to which small countries have lost their guaranteed seats in the ECB Council. Now they will be represented in the group by some of the members on the rotation basic. 

Former top Finnish representative in the EU, Alek Aalto commented on that with an understandable bitterness: “We did fight very seriously on this issue. We still believe that a fair system is such when each EU member state has its own place at the ECB. Surprisingly, we did not have much support or understanding among other EU member states, although many of them would be affected by the change. Only the Netherlands had a sympathetic position in our proposal and Denmark, to some extent. But at the end, we have been left practically alone. And it’s quite obvious that it’s impossible to reach a desired decision of that sort at the highest EU level being in an obvious minority”.

Experts are adding to this that Germany and France were very pushy on the decision to change the representative structure in the ECB, especially prior to year 2004, when ten more countries join the EU. There was a belief among those who were advocating the decision that with such countries as Czech Republic, Poland and Hungary they would never get the desired decision. At the same time, they were pushing these radical changes before the new membership because, according to a Frankfurt-based financial analyst “with 25 people around the table at the ECB headquarter in Frankfurt, the leading EU countries would never get through the decisions they want to. New member countries join the ECB with such a substantial load of their own financial problems that Germany and France took every precaution in order to distance all EU new members, and other small countries from the center of the EU’s financial decision-making”. Said Finnish European MP Esko Seppanen: “I do not have any doubt as to how the decision making picture in ECB will look like in 2004. There will be ten completely lost “orphan states” in ECB who would not know whom to turn to for help, where to go, and what to do. And the matter of truth is that there would not be too many who would be willing and able to guide these ten new members in the EU”.

In practice, the new representation principle in the ECB Council will mean that countries which are not having their own representative there, will be practically unable to influence ECB’s policy and its decisions during the whole period of the absence at the Board.

Comments a top official from Central Finnish Bank Pentti Pikkarainen in the ECB: “In such cases when there is a need to resolve certain matters and problems in their countries, they would be cut off the main ECB financial policy decision making.  This undoubtedly will lead to two major negative consequences: first, small countries and new member states will become much more dependable on the EU’s leadership and leading forces there. Second, the EU financial policy would be structured in a way as to follow the mainstream of the few big member states with much less concern regarding the rest. “The new structure of the ECB Council and consequently its main regulations would be in favor of the big member states whose role will grow constantly. 

Finnish representative adds: “if the EU development proceeds towards further federalization, national central banks will be forced to delegate a share of their authorities to the ECB in Frankfurt. It is becoming an especially acute issue in connection with the EU enlargement. And the new EU member states should not expect to be accepted into Euro- zone too soon”. The main thing from the political point of view, however, is that because of the new structure of the ECB Council, these new countries will not be able to influence the process effectively. And it has been a motivation drive behind many important recent changes within the EU, - many analysts believe.