SANTER SEES REFORMS AS VITAL TO EU ENLARGEMENT

The ways that Santer suggests to strengthen EU

(Finalcial Times, 18/05/1995)

by Lionel Barber, Quentin Peel, Robert Peston

The European Commission will produce plans by the end of the year for further radical reform of the Common Agricultural Policy along with regional and social spending to enable new member states to join, Mr Jacques Santer, the Commission president, said yesterday.

The highly contentious review of the most expensive elements in the European Union budget is seen as essential to facilitate the membership of the emerging democracies of eastern Europe. It has been repeatedly delayed because of the fear of a divisive debate between existing member states, many of which stand to lose large subsidies from Brussels for their farmers and for depressed regions.

Mr Santer insisted that the prospect of enlargement of the EU was now the driving force behind plans for the reform of its main institutions, and behind the need to reform its most important policies.

"Now that we have decided to enlarge the community, we also have to make our institutions more efficient," he said in an interview with the Financial Times.

At the same time he expressed confidence that European economic and monetary union (Emu) would go ahead by 1999 with a sizeable core of EU member states, thanks to the steady improvement in their economic performance.

Mr Santer was speaking before talks at 10 Downing Street with Mr John Major, the British prime minister, at which he sought to explain his reform strategy, giving a high priority both to deregulation and devolution of authority from Brussels.

Although both sides agreed that the meeting was extremely friendly, a Downing Street official made it clear that important differenees remained.

Mr Major reiterated to Mr Santer that the UK would not surrender its veto ~ and by implication would oppose any extension of qualified majority voting - and had no intention of giving up its

opt-out from the social chapter and monetary union.

The official described their 75-minute discussion as "very candid... He will have been in no doubt at all about our position on the social chapter".

In his interview, Mr Santer argued in favour of a cautious extension of qualified majority voting to specific areas affecting the single European market where unanimity is still required to take decisions. In particular, he called for majority voting on EU research programmes - the third largest item in the Union's budget - which were important for European competitiveness. On the question of reforming EU farm policy, Mr Santer said this was "the most difficult issue" in paving the way for the membership of east European countries like Poland, with large farming sectors.

"Every sensible person knows that we will have to look at these questions if we want to enlarge to the east," he said. "But if you approach this as if we can use enlargement to kill the CAP, it won't happen. There are more subtle ways of doing it."

Reform of the structural funds governing regional and social spending is also seen as essential, because without it, all the available cash would simply be transferred to eastem Europe, cutting off billions of Ecus in aid to countries like Greece, Ireland and Portugal, as well as the UK's regions of high unimployment. Whatever happens, the available cash will be drastically reduced for current recipients.

On economic and monetary union, Mr Santer expressed confidence that not only would France meet the convergence criteria for membership by 1999, but so would Belgium, in spite of its large public sector debt.

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For a Daniel entering the lions' den, Jacques Santer is remarkable relaxed. The president of the European Commission was in London yesterday for his second trip in a fortnight to the UK, the country where hostility to his institution and all it represents runs deeper than anywhere else in the European Urtion.

"You have a different political culture here," said a bemused but grinning Mr Santer, half an hour after a bruising encounter on the radio with Lord Tebbit, the former Tory cabinet minister and high priest of the UK Eurosceptics.

The night before, Santer confronted and charmed a potentially hostile audience of business leaders at the Confederation of British Industry. His message was that he was no power-hungry bureaucrat seeking to regulate their lives from Brussels, more the beguiling Bürgermeister, a political animal dedicated to practical problem-solving, and making the EU a more efficient, and more popular, place.

The new president of the Commission still sounds like the Luxembourg prime minister he used to be: he comes across as a conciliator, a fixer, but a man who can be blunt when he wants to. The aim of his London visit, which includes talks with Mr John Major, the prime minister, in Downing Street, is clearly to counter the fear factor, and to head off the danger of his presidency being undermined by British bloody-mindedness.

After nearly four months in office, Mr Santer's strategy is emerging. His eyes are fixed on next year's inter-governmental conference to review the Maastricht treaty, the next big rendezvous on the road to greater European integration.

On the one hand, he says, it is about making the institutions of the European Union work better, to make the whole system more transparent and more effective. On the other, he is determined to play the enlargement card: the prospect of a European Union of 20 or even 25 states within a decade means Brussels must get its house in order fast.

"I hope 1996 is not only going to be fine tuning," he says. "If we want to enlarge the community, then we have also to reform our institutions. It will not work with institutions conceived for six or 12 members. Reform is not just a question of principle, it is also a question of efficiency."

Yesterday Mr Santer spelt out some of his top priorities: a practical timetable of actions needed to carry out economie and monetary union by 1999; new measures to make cross-border co-operation on crime, drug-smuggling and fraud effective; a strategy for making Maastricht's vision of a common foreign policy a reality; the need to tackle the issue of neutral member states in a common defence policy; and the recurring but unavoidable issue of eutting the scope of the Common Agricultural Policy, so that taking in new member states from the east is affordable.

As far as Emu is concerned, Mr Santer is confident that it will happen by 1999, but knows that a lot more technical and psychological preparation is needed. "1999 is quite realistje," he says. "There is an improvement in countries' economies. But we also have to prepare publie opinion. It is not only a question for industrialists and the banks, hut for publie opinion."

Mr Santer quotes with approval the words of Sir Nigel Wieks, the top UK Treasury official who chairs the European monetary committee in Brussels: "People have to love their money. If they can't identify with their own curreney, then it will not be acceptable."

With a chuckle, he notes that the EU leaders have still not been able to agree on a name. The provisional title is the Ecu, but Santer admits that this has no meaning in Germany or Austria.

He says his friend, Chancellor Helmut Kohl of Germany, would be happy to accept calling it the Franc - the Franken in German - with its connotations of the hard Swiss franc next door. The matter must be cleared up quickly so that practical measures such as printing and minting the curreney can begin on schedule.

Mr Santer promises to publish a plan of action for such technical aspects by the end of May - a separate exercise from the process of measuring whether member states meet the so-called convergence criteria for Emu. "Our paper does not deal with the convergence criteria," he says, with an eye on the German Bundesbank's anxiety that the Commission, in league with France and ltaly, might seek to soften the preconditions for admission to the Emu club.

He shows sympathy for the plight of Belgium, which has followed a hard curreney policy linked to the D-Mark for 13 years, but has a pub]ic debt burden which is twice the level allowed by Maastricht.

"They have to make a significant decrease in the public debt, like Ireland," he says. He suggests that the high level of savings in Belgium is a mitigating factor which should allow a more generous interpretation of the rules: "You have a huge amount of savings in Belgium, so they can finance the public debt." The unspoken assumption is that Italy, which also has a high debt and high savings rate, will not use the precedent to press its ovin case to join the first wave of Emu.

Just as he sees the urgent need to sell Emu to the man in the street, so he argues that a more effective cross-border crime strategy would make the European Union more popular and relevant. The present loose inter-governmental co-operation on crime "simply does not function", he says. "I think in each member state I have visited there is a major concern in this area."

Mr Santer says the big worries are immigration, organised crime, drug smuggling, and international fraud (often against the EU budget). Tighter co-operation is needed, although he is not talking about creating a Euro-police force patrolling Birmingham or Bremen.He accused EU justice and home affairs ministers of blocking action on fraud, which is being requested by their own colleagues, the EU finance ministers. Action would require reform of national penal codes, such as agreeing a common definition of fraud. But this is an area which falls outside EU legal competence, so the justice ministers have refused to move, he says.

On the other hand, he is not, lining up for a battle with the foreign ministers. He makes it clear that the national governments will remain in the driving seat on foreign policy. "The Commission is not seeking more competences, more powers," he says. "But we have to improve the procedures. It is a question of efficiency."

He is not seeking to abolish veto rights, nor to coerce countries into taking part in actions against what they see as their national interests. "You can't oblige one country to participate in common action if it does not want to," he says. But he insists that a single member state cannot be allowed to block action agreed by all the others.

For once, Britain is not the culprit. Mr Santer wijl not name names, but it is evident that Greece, in its hostility to Turkey and the former Yugoslav repubiic of Macedonia, is seen as the chief obstructionist. His conclusion is that those EU countries which are willing and able to proceed with a common policy - a "coalition of the willing" - should be free to do so. On defence, he believes the problem of incorporating neutral member states, like Austria, Finland, Ireland and Sweden, can be worked out in detail in 1996. He believes that they have a real contribution in areas such as peacekeeping, where they have at least as much experience as their Nato partners. Mr Santer does not balk at the thorny question of the extension of qualified majority voting - what the British Eurosceptics regard as the erosion of national sovereignty and the British right of veto. He says that it cannot be avoided in an enlarged EU, but for reasons of efficiency, not of principle.

He wants more majority voting on issues dealing with the internal market, and areas of the EU budget such as research spending, where unanimity stijl applies.

Euroscepties such as Lord Tebbit suspect that any extension of majority voting is the thin end of a wedge designed to abolish the national veto. But Mr Santer is not trying to persuade the hardened Eurosceptics; he is after the middle ground.