An Anglo-Franco/German spat is brewing over the appointment of a new EU President. Chris Patten, former Hong Kong Governor and now EU Commissioner for external relations appears to be well positioned to become the new EU leader. Well, I have met the man a few times and written about him in the past. He seems to have strayed from his conservative roots, but he will still be a phenomenal man to lead the EU and certainly be able to function as a counterweight to the Franco-German axis.

That is I think the way to describe the elections for the EU Parliament. Trying to read deeper things into the results is a pointless exercise, echoes of Iraq or a protest vote against a centralized European nation state may play a part for some, but with less than half of the eligible voters bothering to turn up we can’t really attach any meaningful explanations to this result. Michael Totten points to the anti-incumbency outcome which is probably the best explanation for the results overall when you break them down per individual country, with the exception of Britain where anti-European sentiments run deep and impacted the outcome. If that’s the case then it appears that the EU election in essence is driven largely by national issues and politics.

The apathy of the European voter in itself is evidence that many don’t recognize the EU as a decision making supranational body (the EU increasingly is, its parliament isn’t) but merely as a multilateral organization of nation states that has some pros and cons regardless of the way one votes. The fact that voter turn out in the new member states (many of them ex-Communist nations) is around 29% is telling, wouldn’t these be the people that are dying to participate in a democratic process? Are they already so far up the learning curve that they know it doesn’t matter which way they vote or vote at all? In fact their poor turnout has contributed to the 45% turn-out rate overall for the EU compared to 50% at the last election.

There’s one interesting case in The Netherlands where a former EU employee who was fired after he disclosed fraud and incompetence within the European Commission launched his own party, Transparent Europe. This brave whistleblower got a surprising 7% of the Dutch vote, and in Britain a new anti-European group claimed close to 15% of the vote. Still, these are exceptions and in general Europeans are reluctant to really engage themselves in a pan-European debate. In national elections some anti-European groups on both the left and right usually get a bit of traction but they remain fringe groups. The only country where Euroskeptics are part of the political establishment is Britain and it is there that we may see an interesting battle ahead that could even spawn some form of a Euro-crisis, but then we already knew that. The election and its results should leave us in pretty much the same state as the voters: indifferent.

So we’re coming close to the end of the year and many media are starting to reflect on the past year. Was it the year of Iraq? Or was it the defining year for Bush? Or both? A quick look at my site statistics reveals that this article was the one that was the most visited and read of all the stuff that I have produced this year. It got a link from Steven Den Beste, it triggered an Instalanche and resulted in quite a number of e-mails. And all of that happened with good reason. Long before this year started it had become apparent that Europe was facing some serious and fundamental challenges: political and monetary integration, immigration from former Soviet bloc and Muslim countries, a graying and shrinking indigenous population and serious conflicts at the doorsteps of the old country fortress. Some up and coming politicians in various countries had warned about the impending dangers, yet they became the subject of vile ridicule by a complacent political elite and politically correct media that had lost the ability to think and act outside the box of pre-conceived ideas. As with so many things that are left unattended, something will happen that brings them back into focus in a very dramatic and unpleasant way.

The intent to enforce UN resolutions and disarm Saddam Hussein put the predicament of the old continent right into the spotlight. The EU was again, remember the former Yugoslavia, unable to bring itself to the point to play a meaningful role in enforcing freedom and democracy in the face of evil. Tony Blair (my vote for this year’s edition of Time’s Man of the Year), the one leader trying to build a bridge and salvage the for Europeans crucial transatlantic relationship with the US, was rebuffed by the two key European continental powers, France and Germany. They did that with both confidence and arrogance, knowing they were in the midst of shaping their new nation state and took the impending conflict in the Middle East as the key issue to differentiate the old country from the confident and assertive new country across the sea that had come under direct attack from Islamist radicals. They gambled that this move could lay the foundation on which to build a joint European foreign and defense policy separate from what Washington believed in. It would define Europe as a power in its own right. And now the opportunity was there to accentuate the difference between the statist European elites and the Anglo-Saxon free-marketeers: we are not the same, we have a different view of life and the last thing you are going to do is involve us in a war where your interests are materially different from ours, or so we think.

I say that because there were other reasons that forced the Europeans to play this card: a sizeable Muslim minority in Europe required them to be careful when engaging in a conflict in the Muslim heartland and close economic ties with Saddam were maybe worth preserving after all. And, other smaller European nations would no doubt follow the Franco-German charge it was assumed, and it was not just the littler ones that joined the pack, retired superpower Russia happily threw its weight behind the Berlin-Paris axis. Some argued that Vladimir Putin expected to reap a long-term economic windfall from building a trans-European partnership, others pointed that his economic interests were based on the short term given Russia’ close ties and involvement with Saddam. Whatever the case, Europe was drifting in an odd direction and only a few countries followed their healthy geopolitical instincts by siding with the US-UK coalition which resulted in the defining “Old Europe, New Europe” analysis from Secretary of Defense, Donald Rumsfeld. The net result was the most serious rift in transatlantic relations since the Second World War, relations that up that point had defined the security structure of the world. With a Republican leadership that was markedly different from the previous generation of moderate atlanticist Republicans, the chances of America accepting the disconnect as a matter of geopolitical fact had grown phenomenally. Not only had the rift revealed different strategic approaches, it had re-emphasized in Washington the knowledge that it would have to go it alone in Iraq. Possible and likely future ventures could equally be of a go-it-alone nature.

The French and the Germans had embarked on a questionable strategy but to some extent they must have taken comfort from their strong and dominant position on the continent. Yet, the divisions over Iraq had set the tone for a hefty debate among some European nations, as not everyone within the old fort was comfortable with what had happened over Iraq. And there was more to come, again with France and Germany in a lead role. During the second half of this year both countries breached and effectively destroyed the Stability Pact governing the EU’s common currency, turning even a good old Euro-complier like The Netherlands into a fierce and angry Euro-skeptic. And that was not all. Towards the end of the year it had become impossible to reach an agreement on the draft European Constitution, the key summit having failed and the hope for a resolution postponed to next year. It seems that what was designed as a steady and seamless integration of European countries into one-nation state with one currency and one constitution had hit some serious and unforeseen obstacles.

So the leaders within the European house have not only severed the transatlantic umbilical chord, they have started a conflict within the family. Only time will tell if these fissures can be mended, but if they can’t or if they have initiated a fundamentally changed world map, then the year 2003 will go down in history as the year of a seismic geopolitical shift. That’s why 2003 was the year of Europe.

An incredible amount has been written in the North American blogosphere about Europe’s decline this year and I plan to write a longer piece on the subject before I sign off for the Christmas break. I have access to the Dutch press and my own experiences as a European; nothing however trumps a site visit by a prolific blogger to Paris. Roger Simon has done some fieldwork last week and his report is a must-read.

Well, it has happened: the summit on the new European constitution has failed, primarily because Spain and Poland, wanted to have a better ability to influence events than contemplated in the draft constitution that was on the table. Apparently there was a complete unwillingness to compromise according to summit Chairman Berlusconi, in a Dutch newswire I read (sorry no link in English) that Spain and Poland were willing to compromise but that it was Chirac that remained intransigent as the draft constitution favored larger countries when it came to voting procedures.

The atmosphere was not good to begin with as I reported earlier. Late last week the Dutch kept hammering on having the budgetary rules underpinning the Stability Pact included in the constitution which prompted German Finance Minister Eichel to accuse the Dutch of “poisoning the atmosphere”. That is as far away from diplomatic language as you can get and it underlines the fact that there hardly is a team spirit to speak of these days. Andrew thinks that with 25 members the project has become impossible to manage. The Iraqi crisis, the failed Stability Pact and now the discord over the draft constitution are issues complicated by the number of members sure, but we should remind ourselves that two large European countries played a crucial and dividing role during all three debates. That attitude is becoming increasingly unpalatable to the other European countries, large and small.

Although the Dutch are now dangerously close to breaching the EU Stability Pact rules they have been advocating so vehemently, they now want to see certain enforcement principles enshrined in the new EU constitution. They are proposing expanded powers for the European Court of Justice over the Stability Pact and according to a Dutch government official:

“ … an increase of power of the European Court of Justice would avoid further 'political fiddling' with the stability pact by big member states. This would be a 'very important' point for the Netherlands in the negotiations on the EU Constitution”

I wonder if the Dutch government has thought about the implications of this proposal or to put it plainly: if you have banged your fist on the table you may want to assess the likely damage before you continue banging that fist. Incorporating enforcement procedures in a constitution opens the door for many other EU partners to seek to include similar rights. And while they arrogantly and royally breached the Stability Pact rules, France and Germany may actually see some merit in obtaining tools that can help them achieve certain other political objectives that would otherwise have remained out of their reach. It is this point that defines whether the EU is an international organization where members can ignore the rules at their discretion or a supranational entity that can ensure that its members toe the line by imposing certain measures with a legally binding basis in the EU constitution. And that's why asking for strict enforcement rules you definitely have opened the final chapter in the erosion and ultimate disappearance of sovereign rights.

This coming weekend the EU will meet for what is described as a make-or-break summit in Brussels and the prospects are already quite promising:

The European Union's Italian presidency warned Monday that no deal on a constitution for the expanding bloc would be better than a bad one as the pressure mounted ahead of a crunch EU summit this week.

Will keep you informed.

Digesting some of the editorials in the European press on the collapse of the Stability Pact it occurred to me that in a way it is good news for Eurosceptics and bad news for those who believed in the European dream. While opponents would argue that the bullying by the Franco-German axis is evidence of the danger of giving up sovereignty, which is what I have been doing for a while now, it can equally be argued that yesterday’s developments made it clear that national interests will for the foreseeable future prevail over the communal rules. That’s the political fall-out and it may indeed point to the fact that the concept of one union is not as yet viable:

Anger about Tuesday's decision ran deep among smaller EU countries, opening a new divide on a Continent at odds over Iraq and a planned EU constitution and threatening the wider goal of building a European economy to rival that of the United States.

The economic fall-out looks to be more serious. The collapse of the Stability Pact does not mean that that the rules will be adapted or changed, no, they’re gone and each government is now free to set its own budgetary policies, based on each government’s own political preferences. It will leave those implementing monetary policy at the ECB in a very tough spot for their centralized function is now subject to a very fragmented set of political masters.

So it seems the EU Stability Pact is now dead and buried, despite long running efforts by especially Dutch Finance Minister Zalm to ensure that all the players abide by the rules like he had. In the end he was only supported by Austria, Finland and Spain. Here’s what happened:

The veteran Gerrit Zalm, Dutch finance minister, claimed Germany was exporting its excessive budget deficit to other countries through higher interest rates.

Hans Eichel, German finance minister, was unmoved. He refused to accept the humiliation of being told by the Commission, backed by the threat of sanctions, to make a further €6bn ($7bn, £4.2bn) of budget cuts next year.

France, also in the dock and facing an identical Commission recommendation, backed its ally, as did several other countries including Italy, holder of the rotating EU presidency.

There you go. The heavyweights have pulled it off as I have predicted a number of times, and this does not bode well for the future of the EU and it will no doubt force Downing Street to now indefinitely shelve a Euro referendum or any other plans in that direction. That’s the political fall-out, Megan takes a look at the latest developments from the economic side and believes that things are not as grim as they look. We’ll see, but I consider the Franco-German bulldozer a manifestation of everyone’s worst dreams. And note that the bulldozer won't restrict itself to just monetary matters.

One of my regular readers has questioned my insistence that France and Germany are slowly bullying the rest of the EU into submission. Look at the evidence, first they are actively skirting the EU Stability Pact Rules, and now (assisted by lightweights but useful accomplices Belgium and Luxembourg) promoting a European defense force separate from NATO, paving the way for an unbridgeable gap between the EU and the US. The argument my reader put forward was, what about the smaller countries, and what about Spain, Portugal and Italy?

Well, it seems that little new entrant Poland is indeed playing hardball, but my argument is that in the case of the smaller countries such actions have a limited shelf life. The larger countries remain extremely influential when it comes to forking out the infamous subsidies and the Poles do not probably have a long breath here, sustained EU funding must be tempting for any government presiding over a weak economy. They can be bought. As for Italy, Portugal and Spain, their critical voice and pro-American stance has an expiry date: the next election. True, together the smaller countries could build a coalition but since unity among them is not compatible with all the issues, I fear that a divide-and-rule will be the order of the day in the New Europe.

It did not get a lot of headlines last week, but after five years in office Wim Duisenberg retired as President of the European Central Bank. Retired, that is to say, he stepped back as per the terms of a backroom deal in order to make room for Frenchman Jean-Claude Trichet, former head of the French central bank, who has now been cleared by the French courts of any involvement in an accounting scandal at Credit Lyonnais, one of France’s largest banks. This was not exactly a scenario that Duisenberg had in mind when he was asked to become the second most important monetary chief in the world, but he accepted it with grace and served five years as the ECB chief. The jury is still out on his rule, but it speaks for the man that he ended his term with a stern warning addressed to the French and German governments, pointing out the dangers of skirting the EU’s Stability Pact rules. With a Frenchman in the saddle such warnings may become less frequent, although Trichet has a decent reputation as he steered his native country to balanced budgets in the 1990s.

Duisenberg was originally a left-of-center financial expert who became Minister of Finance in 1973 when the tax and spend policies of the Dutch reached their absolute crescendo. Yet, Duisenberg quickly saw the light and when he became Chairman of the Dutch central bank where he established himself as a beacon of sound fiscal reasoning, arguing for deep cuts in government spending as well as lower taxes. This alienated him from his former political friends, but it gave him a lot of credibility in the business world and financial markets and this no doubt contributed to him being picked for the ECB-job.

As I predicted the end of his term would no doubt see a come-back of his infamous wife, Gretta, who gained world fame last year for her anti-Semitic rants and her irate defense of the Palestinian cause with, among others, comments that the Israeli occupation of Palestinian territories was worse than the German occupation of The Netherlands during World War II, an occupation that resulted in the murder of over 100,000 Dutch Jews. She quieted down after a while no doubt as a result of the very negative press, some potential lawsuits for libel as well as to avoid some embarrassment to her husband, but she has wasted no time following his retirement to launch a suit (sorry, link in Dutch only) last week against a journalist who described her as a very naïve and besotted follower of Arafat. That comparison was meant to be humorous, but Mrs. Duisenberg revealed her lack of a sense of humor and took her case to the courts that are expected to rule next week, she’s looking for an apology and 30,000 euros in damages. Of course, insulting Jews on an ongoing basis is fine, but if you are ridiculed because of that you are entitled to monetary compensation. Again, she’s back.

This potential lawsuit is interesting, surviving family members of those massacred in the Bosnian town Srebrenica in 1995, a UN declared safe haven, are now planning to sue both the UN and the Dutch government, since it were Dutch troops under UN command that failed to carry out their mandate of protecting civilians. It remains to be seen whether this suit has any basis in international law, but the culpability of the Dutch government is evident as a parliamentary inquiry in The Netherlands forced the ruling coalition under former Prime-Minister Kok to resign. The Dutch would argue that blame rests with the UN under whose command they were acting, I would argue that the real culprits are the Bosnian Serbs, and it seems they have admitted as much last week. But if a billion dollar settlement will see the light of day, both the UN and the Dutch will have a very strong moral obligation to chip in to compensate for the genocide that unfolded under their watch.

It seems the Dutch Bull Terrier has capitulated in the face of not having enough support to take the French to task for skirting the EU budget rules. I have no idea what prompted this but it will be interesting to learn if there has been any backroom bullying, and if so, France's key ally will no doubt have provided some necessary assistance.

Dutch Finance Minister Gerrit Zalm is not giving up, and he may be the lonely voice in Europe, pointing out that France and Germany flaunting the rules of the EU’s Stability Pact could lead to a serious crisis:

"This creates an overwhelming precedent, and I do not believe we could ever in all decency ask another country to observe budgetary discipline after what happened. The whole structure we had thought out, that we were prepared to set aside our national currencies for and rely on the European Central Bank (ECB), will come crashing down"

Again, thanks Gerrit for reiterating what is so obvious to many and what so few are willing to take a stance on. Zalm has even threatened to take the European Commission to court for not taking direct action against France. The reason that Zalm is so infuriated with what is now unfolding is that he was one of the finance ministers during the 1990s who did everything to meet the budgetary restrictions of the Stability Pact, so that the Dutch could abandon the Guilder and adopt the Euro. France’s actions do not only represent a complete disrespect for the agreements that govern the EU’s monetary set-up, they are also a personal affront to Zalm and his achievements as a finance minister. Not coincidentally it was under his watch that the Dutch economy boomed and outperformed all other European countries. As long as Zalm hangs in, this issue will haunt the French and rightly so.

Arguing last week that the French might have known all along that they were breaching EU Stability pact rules I was pleasantly surprised to note that the Dutch Minister of Finance, Gerrit Zalm, had been undiplomatically clear in his assessment last week that the French had indeed been deliberate. Thanks Gerrit for being clear about that.

The discussion on France and the EU continues with Chris Lawrence picking up on Dan Drezner’s question whether the EU should be seen as an international organization or a supranational authority. Drezner concludes that with France’s ability to flout the rules of the Stability Pact without any penalty, the EU pretty much remains an ordinary international organization. I would argue that he is probably right, but what is important to note is that the EU at its inception in 1951 was nothing more than a multilateral economic arrangement, the European Community for Coal and Steel which transformed itself in the European Economic Community (EEC) and in the late 1980s ended up being the European Union. And today we are talking about a European constitution and an elected EU executive. The journey from a small multilateral to a state-like entity is a steady but slow process that is unfolding over a number of decades. This has always been the fundamental criticism from the British who in Lady Thatcher’s words believed in a “loosely knitted patchwork of nation states”. When I left The Netherlands to work in the City of London I was always under some measure of verbal attack from my British colleagues who would question me about the how and when of the EEC’s sudden transformation into the EU.

The answer to that question is not entirely clear; to a large extent the direction depends on who is in the driver’s seat. I say that to dispel the notion that the EU is a concept forced down every European throat by a cabal of French and German statist elites who dream of achieving peacefully what they could not achieve by war. There’s an element of truth in that, but we should not forget that European (and British) business elites have equally promoted the free-trade zone and single currency concepts that are now a matter of fact. And to an extent, they were right, a free economic zone is a commendable vision but with it came the irresistible institutional need to structure and regulate what that market should look like. If it is going to be one, let’s make it look like one, was the argument. In a way both business and politicians, later supported by an unelected bureaucracy paved the way for the journey from a multilateral entity to a nation state. The speed at which that process unfolds depends on which politicians are in charge and to what extent they are influenced by other interest groups. And since the beginning of this year we know that the relationship with the US is an equally important determinant in shaping intra-European relations.

For now we are in the latter stages of the multilateral phase which is why it is so interesting to see if the next phase of a centralized union state is around the corner.

One thing occurred to me after having posted my thoughts on the UN vote on Israel. Europe is now voting as a block. That is one of the more serious consequences of European integration, going well beyond meeting Stability Pact requirements. Individual nations will loose their ability to put forward an independent voice and given the cultural and historical diversity of the EU’s members that is exactly what makes European integration such a frightening experiment.

It should not come as a complete surprise, yet it is still very irritating to learn that France has again been given respite by the European Union to bring its fiscal house in order. The French have thus avoided a penalty under the Stability Pact that governs the fiscal policies of those countries that have adopted the Euro. A number of smaller countries – The Netherlands being one of them – are annoyed and with very good reason:

They are upset that France, and also Germany, appear to be ignoring EU rules with impunity while they - the smaller nations - were obliged to introduce painful cuts in public spending in order to meet them.

France’s argument against making the necessary budgetary cuts earlier is centered around the notion that fiscal restraint would endanger economic growth. Well, the argument against that is that they should have thought about that earlier and something tells me that the French have known all along that they would be able to get away with skirting the rules. By avoiding the fiscal burdens that other countries did carry in order to be compliant with the terms of the Stability Pact, France has clearly indicated that it will selectively interpret multilateral agreements. That should be a warning for especially the smaller European countries before they commit to any further integration with bullies like France. Once you’re in it’s hard to get out.

The other day a reader responded to my piece on crime comparisons that the non-homogenous nature of societies probably contributed to increased crime levels and that fact maybe explained that crime in America had been relatively high historically and now Europe and Canada are catching up with sharp rises in crime. I do not think that societies that are ethnically diverse would automatically be prone to higher incidences of crime, but what is true is that societies with disadvantaged unassimilated ethnically diverse groups will see fairly high crime levels. A parliamentary commission in the Netherlands conducted some research which shows that the failure to assimilate immigrants combined with their low socio-economic status has made crime one of the few viable career tracks for young people that belong to these groups.

The contrast with the US and Canada is notable. The latter two are immigration countries by nature where integration into the larger English-speaking population is one of the basic parameters of allowing immigrants in and assimilating them upon their arrival. In European countries the realization is beginning to set in that not only have any attempts to integrate new minorities into their nations failed, there is, despite the fable of tolerant multi-culturalism, among the indigenous European populations at large a distinct disinterest in helping to integrate these minorities. While that has created fertile recruitment grounds for crime, in the long run the rift between an affluent group of locals and a disgruntled triaged group of non-assimilated immigrants is very likely to deepen further.

We also know that both groups are subject to different demographic dynamics, and that raises some serious questions about the long term stability of these societies. In the short run crime will be the manifest consequence, but given the ethnic roots of the majority of these groups, in the long run terror will most likely be the distinguishing factor. Some have argued that France’s and Germany’s reluctance to support the US in its war on terror is fed by a deep fear of these restive discontented Muslim masses inside fortress Europe and that assessment is probably right. The question is whether the Europeans are willing to deal with this potentially lethal social and cultural undercurrent in their societies. Waging a war on terrorists is one thing, drastically reforming the social and cultural structure of your society is another one. The Dutch research has shown that to date, integration has failed miserably and is evidence that Europeans are not only losing their fight against crime, they have lost an important battle in the fight against terrorism. Let's see if they can recover from this huge setback.

At the peril of contradicting myself about economic freedom and cross-border mergers, I have to say that today’s conclusion of the Air France – KLM Royal Dutch Airlines deal does not get me very excited. The net result of this merger, which I discussed before, is Europe’s largest airline and it appears likely that Italy’s Alitalia will join the new combination later on. Again, market pressures have forced both firms to combine their operations; I just would have preferred an Anglo-Dutch link, that’s all.

Growing up in The Netherlands the NRC Handelsblad was the newspaper of choice for the more analytical right-of-centre minded, and the paper to some extent was comparable to The Times in Britain. As an evening newspaper it was the focal point of news gathering and discussion in our family, and as a teenager I was a delivery boy for a while bringing the paper around the suburbs of my hometown. Long after leaving The Netherlands I still read it: in Hong Kong I got a mailed edition focused on Dutch living abroad and these days I read it online. Yet, by today’s standards the paper has migrated to the left and has become very skeptical of America and its foreign policy and has taken a clear pro-European stance. These days I would rather compare it to The Independent than to The Times, but it’s still quite interesting to check in on them and I found yesterday’s editorial on Sweden’s rejection of the Euro worthy of note. Here’s an excerpt, just translated:

If economic uncertainty would have been compensated by clarity and unity on the political and economical front in Brussels, if Europe could convincingly show for what it stands even in less favorable times, then the Swedish no-voters would have had a harder time. But no one can argue that today there is something like a unified and forceful Europe. The pitiful performance with regards to the Euro’s Stability Pact, the latter intended to act as a mechanism to ensure the Euro’s value will not have escaped the Swedes. The political battles within Europe about Iraq and the divided attitude of the EU’s members with regards to America will also not have solidified trust in Brussels.

Their assessment is right but the underlying rationale for their argument is not. They argue that a more forceful and unified European front would have put the Euro in a favorable light in Sweden and maybe that would have increased the chances of a “yes” vote. They think that the European institutions should get their act together in order to ensure a “buy-in” of the public at large as they continue to believe that a strong and unified Europe is for the general good. The argument should be reversed, as the public at large is reacting to what they see as a very questionable experiment and serious doubts have been raised about the experiment’s feasibility. We have been through a stage of unity and forcefulness, resulting in the adoption of the Euro in most European countries which in many cases was achieved without any direct democratic consultation. The divisions over foreign policy, the most recent example being Iraq, are not new. The Europeans for instance grossly mismanaged the civil war in the former Yugoslavia and it were the Americans that in the end neutralized and stabilized the conflicts in both Bosnia and Kosovo.

The European Union has failed during a number of crises, the introduction of the Euro has hardly been a success and Europeans are beginning to question the validity of transferring sovereign power to an entity in times of serious economic and political uncertainty. While a more unified stance probably could sway some skeptics, recent events have sowed doubt among many about the very feasibility of a forceful and unified Europe. Unity and force are not a panacea, on the contrary.

So the Swedes have given a clear “no” to the Euro in yesterday's referendum with 56.1%, rejecting the idea of abandoning the kronor in favor of the Euro. This is big news. The margin by which they have done that is solid, but is significant when you consider the fact that the referendum was tainted by the murder of the passionate pro-Euro cabinet minister Anna Lindh last week. As with the murder of Fortuyn shortly before the election in Holland last year, many observers expected a sympathy vote as a last salute to Mrs. Lindh and if we assume that that indeed happened then the numbers are even more staggering. It’s clear the Swedes do not believe in the European project as currently defined and at the heart of their reasoning there is an array of arguments, both economic and cultural ones that appear to cross traditional political boundaries.

The far reaching consequences are manifold but the seemingly unchallenged victory tour of the Euro seems to have come to a halt and the implications will be felt all over Europe. The most important conclusion is that Tony Blair, who in the wake of the Iraq-Kelly-WMD affair has already lost a lot of political capital, will now probably postpone a Euro-referendum indefinitely leaving the UK firmly outside the monetary grasp of Europe. The only other country to have rejected the Euro is Denmark and any hopes that the Danes would reconsider their inital rejection are dashed in the wake of the Swedish vote. The sentiment was very succinctly worded by one Swede:

"We can trade with Europe but we don't want to be too close."

That has always been the idea of the European union: a loosely knitted group of countries that allowed for the free movement of goods, services and people. In addition there would be co-operation in a lot of other areas. That idea however never meant political and monetary integration and the abrogation of powers for the benefit of an unelected and centralized bureaucracy in Brussels. The Swedes, from left to right, recognized that and have firmly rejected the Euro. This could be the tipping point for the Euro and it will be very interesting to see how the Euro-establishment will try to explain this one away.

Update: A good summary can be found over at Unpersons who fear that there's a risk of re-running the referendum in order to get the 'right' result.

In many ways issues of integration such as the ones that Europeans are facing today are both economic and cultural and in a way it does not surprise me that resistance to the Euro comes from the Anglo-Saxon and Nordic regions and not from continental Europe. Their cultures simply do not fit into a highly centralized European fold. Those of you who will remember my piece on the natural match between the Dutch and Anglo-Saxon approach to business and capitalism in general, will no doubt understand that I am horrified at this announcement.

KLM Royal Dutch Airways discussed merger opportunities with British Airways twice during the 1990s and many felt that there was both a business and a cultural fit given the notable successes of other Anglo-Dutch ventures: Royal Dutch Shell, Unilever, Reed Elsevier and the ING group bailing out Barings in 1995 to name a few. But that match by the way extends to the USA as well: think of the huge retail network that Ahold operates in the US and the fact that KLM has a majority stake in Northwest Airlines. In any case, the KLM-BA negotiations always failed and now KLM, desperate for a partner in a consolidating industry, appears to have teamed up with Air France. I can’t think of any French-Dutch merger and surely hope that this is not the first one as it is doomed to fail, but I have no doubt that it will fit right into the French agenda (Air France's majority shareholder is the French government) of trying to become the dominant force in continental Europe. And that the French government as a consequence ends up with a piece of a major American carrier, well wouldn’t that be a bonus?

The brutal and violent death of Swedish Foreign Minister Anna Lindh in a Stockholm department store brings back some memories of the killing of Pim Fortuyn in The Netherlands last year. It is interesting to note that it now emerges that Lindh had received some very serious threatening mail and e-mail in the weeks leading up to her death and it beckons the question, as it did in the Fortuyn case: why was she not given more protection? Apparently in Sweden only the King and the Prime-Minister get government bodyguards, but especially in view of the violent death of Swedish Prime-Minister Olof Palme in 1986 one would have thought that security would extend to more than just one cabinet member. Imagine Colin Powell getting stabbed while shopping at his local Wal-Mart.

Her death comes shortly before a referendum on Sunday which should decide whether the Swedes want to abandon their currency in favor of the Euro. If her death (she was stabbed to death, no arrests have been made) was somehow related to this referendum the perpetrators could come both from the right (opposing Mrs. Lindh’s pro-Euro stance), but they could equally come from the far-left, interpreting the adoption of the Euro as a pro-business and pro-globalization move. On the other hand it could be a deranged nut, but I doubt that given the timing of the murder. Let’s see what the impact will be on Sunday’s referendum.

Update: Apparently members of the Dutch cabinet still do not get round the clock security, only the Prime-Minister does, and yes, Dutch ministers do go around on their bikes.

ECB President Duisenberg is back in the news and this time positively. Today he has rightly pointed to what many have been saying for quite a while and that is that if the stability and growth pact that governs monetary affairs in the Eurozone is to work at all, all participants need to abide by the rules. That is a very simple truth but it needs to be restated for those that are unwilling to abide by those rules and think they have the leverage to tweak them for their own needs:

A lack of fiscal discipline... is a factor weighing adversely on the euro-area's long-term growth prospects," he said. "In order to strengthen confidence in the euro area, it is fundamental... to abide in all respects by the agreed rules of the game.

Without mentioning their names, it is clear that Duisenberg was referring to France and Germany, countries that have not used the windfalls of the 1990s to bring their fiscal house in order and are now close to or have already breached the Eurozone’s rules which do not allow them to run deficits in excess of the agreed 3% of GDP. If France and Germany will try to find a loophole and somehow manage to get an exemption from these rules, which they are bound to do, then a huge blow will have been dealt to the entire concept of one Europe and one European monetary policy, not too mention the impact on economic growth in the Eurozone. Yet at the same time they will have confirmed what many eurosceptics have feared, and that is that the ultimate goal of the French and the Germans is to establish one Europe where they will be the ones that are in the driving seat. If they are ignoring the rules this early in the game then maybe the game should not be played at all.

Great piece by Andrew on the implications of the draft European Constitution, another building block in creating a centralized European nation state dominated by France and Germany. The article focuses on the way Paris and Berlin are able to dominate this process as well as the longer-term impact on US – Europe relations. All of this is reason for grave concern but in most European countries (the UK of course excluded) there is still is no real debate about ceding sovereignty to a higher entity in Brussels. On the one hand this is a direct result of the complacency of the average European citizen, but it is also closely linked to the arrogance and unwillingness of government leaders to invite citizens into this important process. It is asymmetrical as well, some countries have held referenda on the new currency, the Euro, while others haven’t and some are willing to call a plebiscite about the draft constitution as currently tabled while others aren’t. More on this on Peaktalk going forward as this process is one of historic proportions and will it undoubtedly lead to a revised power balance in the world. At the same time it is reason for apprehension as basic freedoms, democracy and sovereign destiny will slowly disappear. They will be replaced by a centralized, top-down, bureaucracy dominated by the two nations that are now trying to achieve peacefully what eluded them militarily: a European Empire.

Exit polls show that the Czechs, following the Poles last week, are giving a clear approval to European Union (EU) membership. This is not a surprise; it is the final touch of a process that started in 1989 when the Soviet-backed communist regime in Prague collapsed. The Czechs want, like the Slovenes, Hungarians, Slovakians, Lithuanians and Poles who voted yes earlier, to become part of Europe for both political and economic reasons. This is understandable, but what concerns me is that these nations, like their mature Western European counterparts, have given little thought to the longer terms implications of ceding sovereignty to a centralized European bureaucracy. It could be argued that Western Europe has already undertaken a journey that has led them to accepting a merger of sorts with other nations, but the new democracies of Eastern Europe have hardly been able to establish their own renewed identities after shaking off the communist oppressor. They have consequently less wealth and less muscle, so it will be infinitely more difficult for them to ascertain their position and independence in the EU. The British, the Dutch and the Spaniards are able to make their voices heard, but I fear for the Czech leader who has to stand firm against vested French and German interests.

I saw a few interesting pieces on TV leading up to the referendum and was hoping that the Czechs would be a little more critical of the European venture and some experts believed that they would. One commentator compared the process to a wedding, you are led to the altar and a “yes” is almost certain, the referendum is just a formality that the country has to go through. So if this analogy is correct than the question is: what if the marriage fails? What are the terms of divorce? That question is not only relevant for the Czech Republic, it is relevant for all European countries who join this complicated venture, and this is also why the British are so careful: there does not appear to be any flexibility once you’re in, and it is doubtful if there’s a way out. If there is the terms of the divorce will only be defined at that point in the future and not now, just like any other wedding.

The Polish people have voted overwhelmingly to join the European Union, which is not really a surprise. For the Polish it represents an opportunity to join an entity that will help accelerate its transition from a communist to a market based economy. But, more importantly, it will help cement a relationship that, in addition to NATO membership, may finally give it the much needed connection that for once and for all will put an end to the ever present risk of the Russians considering Poland as their natural backyard. As much as I am a skeptic about Europe I do understand the tremendous joy of the Poles now that it seems that their nation is finally turning a corner after more than 60 years of suffering at the hands of nazism and communism. By supporting Bush during the war with Iraq the Poles have also positioned themselves nicely for a solid relationship with the US which may yield some immediate benefits with the likely establishment of new US military bases in the country.

The Poles are clearly coming from a different angle than other European countries so we cannot really expect them at this stage to see the pitfalls of a centralized European nation state. The British are very well aware of that danger and they today have again managed to postpone the issue of holding a referendum to abandon pound sterling and join the Euro. Holding a referendum now would likely end up in a defeat for pro-Euro Blair, so some have interpreted today’s decision as a cynical ploy to enable a referendum at a date when there may be a greater likelihood to obtain a ''yes''. In any case, on a day when the Polish decision seems to validate the legitimacy of the EU it is good that some countries continue to show their critical approach to building a European superstate.

One of the more troubling changes in Europe is the impact of the new currency, the Euro. More than a new currency, the Euro is essentially a step in a process that is aimed at obliterating all European nation states and bring them together in what is proposed to be a federal structure. In practice however, the new European federation is likely to be a highly centralized bureaucracy in which the French and Germans will be the dominant forces that will determine the shape of a new European nation state. The process by which the European Union (EU) has taken shape has not really been democratic, some of participating nations have from time to time held referenda but in other nations, like The Netherlands, decision-making has been the exclusive purview of government with little input from voters. It is of course true that governments rely on democratically elected parliaments, but in practice most political parties have not formulated any interesting positions other than that European integration is for the better as it creates more opportunities and economic growth. It is unprecedented in history to see sovereign states voluntarily handing over decision-making power to a supra-national body and its disturbing that on such very important issues little or no voter input is sought. The blame for this rest equally with the European citizens, who, like their North American counterparts have become disengaged from the political process, and have consequently shown little interest in their ultimate destiny. The ones that are engaged have focused on other issues such as crime, healthcare, education and the environment, to the detriment of the paramount issue of national sovereignty. With little discussion or public interest, many European governments have had a freehand at negotiating away their sovereignty to the greater good, the EU and its bureaucracy. As we know, the British have been a very clear exemption and they have consequently averted the perils of the EU’s new currency.

A key example of the negative side effects of this Euro is the phenomenal increase in consumer prices since its formal adoption. In The Netherlands, prices since 1998 have risen by approximately 49% and research indicates that basic inflation only explains 15% of the price increases over that same period. The problem has been that one Euro represents 2.20371 Guilders (the old Dutch currency) so on the day that the Euro was adopted as a currency for day-to-day transactions many businesses not only translated the price of their goods into Euros, they also marked up the price knowing that in the confusion of newly priced goods the average consumer would not register an increase in price. Some were even so blatant as to convert Guilders to Euros 1:1, which effectively represents a price increase of 120%. And, with some exceptions, Dutch consumers are biting the bullet and are willing to pay these exorbitant prices. Over the past week I have noticed how expensive the place has become, and although I will not go broke over a 4 Euro toothbrush it is nevertheless very annoying and many Dutch consumers end up in the red before the month is over. You do have to wonder about a 50% price increase for peanut butter and, hold on to your seats, a 106% increase in the price of a museum ticket.

The have been some corrections. The leisure industry has scaled back some of its brutal price hikes and a slowdown in the economy has lead to some mark-downs of various consumer good prices but overall the place remains pretty expensive. Both the Dutch and European monetary authorities have tried to dismiss these numbers and pointed to the fact that the average consumer was not able to effectively deal with the new currency. While this underlines the extreme arrogance with which European officials deal with their subjects, they do unconsciously make the point that the average European citizen is now footing the bill for something they could have helped shaped but neglected to do so. It can only be hoped that Europeans become more pro-active in shaping their destiny, especially now that a Frenchman is drafting a European Constitution that will essentially end the envisioned partnership of independent states and establish a centralized European super state. There are great merits in European co-operation, especially on the economic side, but the increasingly rapid destruction of independent nations, their laws and traditions was something that European voters never signed up for. It is time that they wake up and make their voices heard, having to pay 50% more for a pot of peanut butter will be negligible compared to the upcoming transformation of their very own nations.

Dutch people have historically not taken the Belgians very seriously as a nation and as the English have Irish jokes, the Dutch have jokes about Belgium. Yesterday’s report that a left-wing candidate in Belgium's parliamentary elections has lodged a war crimes complaint against Gen. Tommy Franks, will certainly test the American sense of humor. This can hardly be considered a joke and the US administration has made it clear that this may have a lasting impact on relations with Belgium and, more importantly, Belgium’s role as a venue for NATO meetings (NATO is headquartered in Brussels) could be jeopardized. The Belgians have apparently taken steps to fix this ridiculous situation earlier:

The Belgian parliament revised the law last month after complaints were filed against Israeli Prime Minister Ariel Sharon, former President Bush and U.S. Secretary of State Colin Powell. Under the new amendments, Belgian courts should refer foreigners facing war crimes charges to their own countries if they are democracies with a record of fairness in justice.

Great, that would mean a referral of the case against Tommy Franks to the US Justice Department. The change in legislation did not stop the complaint against Gen. Franks, which of course included the accusation that the Americans failed to stop the looting of cultural treasures. This bizarre complaint serves nothing but the political agenda of a number of fringe politicians in Europe who are prepared to do anything to soil the reputation of those who fight and stand up for freedom and democracy. It may be yet another isolated action by a madman, but taken together with the German, French and Belgian position prior to Iraqi Freedom it is hard to see how relationships across the Atlantic can even begin to heal. For Belgium it appears that the journey to irrelevance on the international stage is now well underway.

Great atmosphere. Fresh from the BBC an update of the EC summit today in Brussels:

The French are not prepared to talk about the reconstruction of Iraq at all at the moment. People who have been at these summits and sat inside the room for many years say they cannot remember one quite as bad as this. Tony Blair and President Chirac have at least briefly shaken hands but they spent most of the time on the opposite sides of a very large room and the way they are regarding one another at the moment, it's probably a good thing.

This by the way is a great online news log service with lots of war updates.

So what about France, does the European-born Peaktalker have any opinions here, or concerns or a reaction? Well, I thought about it long and hard and I think it is time to forego a well-constructed political argument. The whole Chirac charade was expected although I must say that it surprised me that they were willing to push it this far, or as Bush said it in yesterday’s press conference on the Azores: “France showed their cards”. So I have decided on a somewhat lighter approach to my dealings with France.

In Europe in the 1970s there were really three major holiday destinations of choice for the Dutch: stay at home, Spain and France. Going to France was usually equated with taste and an appreciation of all things cultural so I ended up spending a lot of time with my parents in France, from the beautiful Riviera, to Bretagne, Normandy (D-Day memorials) to Paris to the Alpes for skiing. Great holidays, great fun, interesting history and for a young boy it was a thrill to go to France. For the generation of my parents France became some sort of a cultural benchmark: French wine, French cheese and, yes, they also brushed off their basic school French and started to take French lessons again. Some people even started to serve up French cheese as a snack before dinner, something that even the average Frenchman would find absolutely ludicrous.

In spite of all of this I never connected with French culture that deeply, a visit to Greece spelled a love affair with that country and an Israeli visit unleashed a passion for Israel (look at my post of March 2). While Paris in Dutch folklore is heralded as that great city of lights and beacon of culture I was not really captivated by a great city until I visited London in 1978. What was ever so special about Paris if there was something called London ? The international atmosphere, the language, the architecture, the pubs, the theaters, the commercialism in this thriving metropolis left Paris in the dust and it was not a surprise that my first real job application was for a bank in London.

So, for some reason I immediately connected with Anglo-Saxon culture and Britain in a way that I never connected with its opposite in Europe, France. Maybe, there is a deeper reason for it as all children want to prove their parents wrong or show that they have set out on a materially different course. There is some merit to the argument that I rejected the French and their culture precisely because of this. To this date my parents bring out French wine when I visit them and my father continues to be unconvinced of the great American and Australian wines I serve whenever he visits my home. And yes, I get panic attacks when people suggest that “French immersion” is the way to go when it comes to education here in Canada. I just do not connect with it and I always feel it is necessary to make a point that I distance myself from whatever is French. Which of course did not stop me from highlighting my French language skills whenever I applied for a job.

I never visited France again since my childhood years until the mid-90s when I lived in Asia. On a business trip to New York and after spending 2 weeks in a hotel on Fifth Avenue I had to fly back to Hong Kong and had decided to go via Europe and stopover in Paris for a meeting about a potential telecom deal in Indonesia with a large French conglomerate. Mind you, you are seriously spoilt if you have spent two weeks at the Peninsula but I will never forget the reaction in the Paris hotel when I turned up (after an overnight flight), a bit too early. I was basically told to get lost for I had dared to show up too early, there was no room available and, no, I could not shower and change for my meeting and it was a problem and it would take a while for them to find an alternative arrangment for me. I am a quiet and easygoing guy but when I have a meeting to go to and it appears I am not going to make it in time I can become quite agitated so I got angry. So I had to raise my voice and eventually I got a room to change, but right there at that moment I knew once and for all that Anglo-Saxon culture and manners had so much more than this arrogant, bizarre, French behaviour. Now you may not get that at every hotel in Paris but the contrast between New York and Paris at that moment was too much for me. I got the room, made the meeting but did not get the Indonesian deal, which in retrospect was for the better but that is a different story.

In summary, despite good memories from my childhood years, I have never developed a warm bond with the French. Their attitude over the past few months in relation to Iraq has hardly been a surprise to me and I decided not to spent too much time on it. Somehow it was a given and it brought back some memories and feelings that I thought I’d share with you.

Every so often you come across bizarre snippets of news. Saturday’s New York Times (sorry can’t get the URL) alerted us to the fact that the Bosnian Serbs have been ordered by the Human Rights Chamber of Bosnia and Herzegovina to pay US$2 million in compensation for the massacre of muslims in Srebrenica in 1995. The money will be used to build a memorial at the graveyard where families of the victims plan to bury the remains of their relatives once they have been identified. Apparently, part of the funds will also be applied to DNA testing which is quite expensive.

While this is a step in the right direction it appears to me to be a bizarre one. How would relatives of Israelis killed in the recent suicide bombings react to the news that the Palestinian Authority would be paying for a memorial at their relatives’ gravesite? Is this not adding insult to injury? I applaud the fact that steps are being taken to address past wrongs, but let’s not forget what really happened in Srebrenica as it represents one of the darkest chapters in Europe's recent history. Innocent civilians had fled to Srebrenica as the United Nations had declared this city a safe-haven. When Bosnian Serb forces captured the city women and children were separated from the men and most of the men were executed. The UN forces present failed to intervene, rendering the term ‘UN safe haven’ a meaningless concept that ultimately cost many innocents their lives. While the Bosnian Serbs are first and foremost responsible let’s not forget about another party that carries a huge portion of the blame here. The UN failed miserably in Bosnia and if the time is there for reparation payments maybe it is time that the UN is taken to court.

Today we have witnessed another installment in the continuing French-German soap opera that has lead to a very serious rift between the U.S. and a number of European countries. The Russians are tagging along, which is a disappointment, and it is now very clear it is no longer about Saddam but about creating a European counterbalance to the U.S. and to some extent to the United Kingdom. Tony Blair's genuine efforts to act as a bridge between the U.S. and continental Europe have not worked. From the point of view of a Euro-skeptic this may all be for the better, but it is very disappointing nonetheless. My disappointment stems from the fact that the democracies of the Western world are no longer able to speak with a unified voice and have given Saddam a victory of sorts by piling delay upon delay leading in turn to prolonged inaction. The longer this diplomatic farce drags on the more Saddam wins, the longer U.S. troops have to wait to move in and the greater the likelihood that the reign of terror claims more victims. The sickening attack today on a bus in Haifa is a dreadful reminder of the fact that this reign of terror continues unabated. Suicide bombers and their families are subsidized by, among others, Saddam.

I have to say, I am not surprised as to how this diplomatic chess game is playing out and in a way I am glad to see that the hold on European politics that the French and Germans have had over the past few decades is beginning to fray. Strong dissent from a number of Eastern Europe countries and a further strengthening of the ties between the U.K. and the U.S. will reshape the European continent for decades to come. Even the Dutch government, notoriously weak for raising an independent voice within Europe, today communicated its utter dismay over the way the French and Germans are handling matters.

The efforts of the French and Germans to build a strong unified Europe as a counterbalance to the U.S. were well on track during the 1980s and early 1990s under Mitterand and Kohl. The process hit some serious bumps in the road during the course of the 1990s when Europe was incapable to deal with the ravages of war in the former Yugoslavia and the U.S had to intervene in both Bosnia and Kosovo. The new Eastern European democracies instantly learned that the real deal was coming out of Washington and not out of Brussels, Paris or Berlin. Now the picture is even clearer and a fractured Europe will have to refind its balance. With a disinterested America and a disappointed United Kingdom it will be a very difficult and long process.