Ash cloud, Greek debt underline EU problems

By Timothy Heritage – Analysis

BRUSSELS (BestGrowthStock) – Greece’s debt mountain and a volcanic eruption in Iceland have compounded the European Union’s problems in establishing itself as an important player on the world stage.

Both crises highlighted the cumbersome process of securing agreement among 27 countries which have a domestic audience to please and often opt for a knee-jerk defense of national interests.

Governments were accused of closing air space too fast in response to the volcanic ash cloud that grounded thousands of flights in Europe, while the EU has been criticized for acting too slowly.

The EU, and particularly the 16 states that use the euro, faced heavy criticism for taking weeks to agree on an aid package for Greece, then appearing to differ over what had been decided and failing to calm financial markets.

Critics say the two crises highlight the same problems — political divisions, complex decision-making, a focus on national not European issues and a lack of strong leadership, all of which leave the EU looking flat-footed and weak.

“We … seem to have been in a position of almost licking our finger and sticking it in the air to see which way the wind is blowing,” Philip Bradbourn, a British Conservative in the European Parliament, said of Europe’s handling of the ash cloud.

Giovanni Bisignani, director-general of the International Air Transport Association, complained that it took five days just to organize a conference call of EU transport ministers even though several hundred thousand passengers were stranded.

“This is a European embarrassment and it’s a European mess,” he said.

Similarly scathing criticism has been aimed at the euro zone countries for agreeing on an aid package for Greece only on April 9 after two earlier attempts — a leaders’ statement on February 11 and an initial deal on March 25 — proved ineffectual.

Even now there are questions about how the EU and International Monetary Fund aid would be triggered if Greece required it. The premium that investors demand to hold Greek debt has soared, despite the euro zone’s efforts.

CRACKS IN UNITY

After each attempt to secure an agreement, cracks have quickly appeared in EU unity, with countries offering differing versions of what has been agreed or trying to delay implementation because of domestic political pressures.

“There are different interpretations and obviously it’s a danger if trust starts to disappear between politicians,” said Hans Martens, chief executive of the European Policy Center, a think tank in Brussels.

He said leaders were focusing on national problems rather than pan-European issues after the global economic crisis.

“At the moment, the political tide is going toward nationalism, which is affecting mainstream parties,” he said.

The support of Germany, Europe’s biggest economy, is vital for any financial assistance for Greece.

But the German government is reluctant to provide money before an election in the state of North Rhine-Westphalia on May 9 because it fears public opposition to a bailout could damage the ruling parties’ chances of success in the vote.

Defeat in the election could deprive Chancellor Angela Merkel’s coalition of conservatives and pro-business Free Democrats of its majority in the upper house of parliament.

Other leaders across the bloc of 500 million people also face pressing domestic problems or elections that are distracting their attention from dealing with European matters.

Coalition disputes threaten the stability of Italian Prime Minister Silvio Berlusconi’s government. French President Nicolas Sarkozy’s approval ratings have dropped and his UMP party won just one of 22 mainland regions in elections in March.

Britain faces a parliamentary election on May 6 and Belgium’s government collapsed on Thursday when one of the five coalition parties pulled out of the coalition.

Many analysts question the quality of leadership across the EU and are concerned there is a lack of political vision.

“There’s an utter lack of real leadership anywhere,” Martens said. “We need now to look at whether Europe is really a world player. I’m afraid my conclusion is that even a united Europe is starting to be a little bit more irrelevant to others.”

NOT THE USA

Divisions came to the fore last year when the EU struggled to agree who should be the bloc’s president and foreign affairs chief and to complete ratification of its Lisbon treaty, intended to make decision-making smoother in the union.

Diego Lopez Garrido, Spain’s secretary of state for European affairs, has witnessed the relationship between the EU institutions at close quarters in recent months because his country holds the EU presidency, a mainly organizational role.

He says coordination with EU President Herman Van Rompuy, whose post was created under the treaty, is smooth. He defends the EU’s actions over the ash cloud as “dynamic” and highlights a culture of closer economic cooperation developing in the EU.

But during a meeting with reporters in Brussels this month he also pointed to the fundamental problems the EU faces trying to secure quick agreements among all 27 countries, despite implementation of the Lisbon treaty on December 1.

“The European Union is not the United States. We are 27 states, not one state,” he said.

The difficulty reaching agreement among so many countries and the lack of a common vision have caused many analysts to doubt the euro zone or the EU will carry out far-reaching reforms to emerge stronger from its problems.

“I am not sure we have the quality of leaders to face this challenge,” said Andre Sapir, Professor of Economics at Universite Libre de Bruxelles.

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Ash cloud, Greek debt underline EU problems