'Old Europe' must reform or crumble, Blair warns leaders

PEOPLE throughout Europe will carry on rebuffing their leaders unless the European Union changes its priorities and cuts agricultural spending, Tony Blair declared last night.

After tough talks with President Chirac in Paris the Prime Minister raised the stakes before tomorrow’s Brussels summit by linking the two issues that have brought the Union into crisis — the budget and the constitution.

Mr Blair, objecting strongly to the EU deciding collectively to put 40 per cent of its budget into agriculture where only 2 per cent of its people were employed, said that it was difficult to see how differences could be bridged this week.

The Prime Minister challenged “old Europe” by saying that the Franco-German partnership could no longer be the motor for running the Union.

“If we want to reconnect people in Europe with the idea of the EU then we have to set a new political direction and reconnect the priorities which the people have with the way we spend money in Europe,” Mr Blair said.

Despite signs that Britain may be prepared to exempt the EU’s poorer members from contributing to its £3 billion annual rebate, Mr Blair repeated that it could not be removed without a fundamental reappraisal of all the EU’s spending priorities. It would not be given away for a “slapped-together deal that does not work”.

Mr Blair said that the summit should agree a lengthy pause in ratifying the constitution, already rejected by France and the Netherlands, while the EU sought a new and dynamic direction. He has allies in this — it emerged yesterday that the Netherlands and Sweden are backing his calls for a shakeup of the Common Agricultural Policy.

Mr Blair disagrees with M Chirac and Gerhard Schröder, the German Chancellor, over whether the 2002 deal which set CAP spending to 2013 can be reopened. He says it is impossible to envisage the reappraisal he wants without touching the CAP and senior British ministers are pointing out that under Paragraph 12 of the 2002 agreement the CAP settlement can be reopened as part of the current budget negotiations.

After an hour of private discussion with M Chirac, Mr Blair admitted “sharp” disagreements over the budget and sought to shift attention back to France’s rejection of the constitution. He concluded: “Let’s be honest — if there was a referendum in most parts of Europe at the moment, the answer would be ‘no’.

“The response should be to concentrate on issues of how we spend European money, the response should be to reconnect the priorities of the EU with the priorities of the people of Europe.”

M Chirac was in no mood to back down. A spokesman said he told the Prime Minister: “In the situation of political crisis now affecting Europe, it is important that we do not add financial difficulties.” There was no joint press briefing of the sort that traditionally follows such mini-summits between EU leaders.

Mr Blair demanded changes to the way the EU is run. “It’s got to be run on a different basis. We need a strong Europe, but it’s got to be a strong Europe of the right kind. The Franco-German relationship is very important but it cannot comprise all of what now drives Europe forward,” he said.

Last night Mr Blair addressed the French people on the evening news on TF1, the most-watched television channel. He defended the British economic system, which was held up as the unattractive future of Europe during France’s referendum campaign.

“We have tried to find another way to combine social solidarity with an economy that is very competitive,” he said.

His appearance in stumbling French was described by one woman viewer as “pure Hugh Grant, all apologies and self deprecation”.

M. Blair has touched directly on THE core issue of the EU as it exists: the PAC IS the European budget.

The TVA goes to Europe, and Europe spends it primarily on the PAC.

This was a cosy arrangement for a long time, but now that the EU has frayed on political unity, M. Blair has found the issue that can transform the union.

It is true: France gets more from the PAC than anyone else. And it was designed this way. Given that, it was always possible to ignore the British rebate.

But M. Blair wishes to put the PAC into play, and the Swedes and Hollandais apparently agree! One can envision other countries that may well want to bring this issue to a head. The East, for example, would benefit from the PAC, but in nothing like the proportions that France does.
This is all on the table now.

Schroeder's government is apparently mortally wounded, but we can expect nothing but resistance until he is gone.

And in France?
Reforming the PAC will be impossible! It will provoke a general strike of farmers.

If the British desire to quite literally upend Europe and provoke a literal French revolution, a new 1968, getting Europe rolling in the direction of dismantling the PAC will do it. The French agricultural sector is massively subventionne, and while massively productive, it is a productivity that is often absurd. Witness the destruction of fine Bordeaux and Burgogne this year, or their conversion into alcohol for motorcars!

The market cannot function here, because the state so completely dominates the field.

Of course, this is also true of American agriculture and the massive subsidies.

M. Blair has a real opportunity here to change everything.
Ireland, Sweden, Finland, Holland, perhaps Denmark, Austria and Poland - these might all join in the clamor to change the PAC.

France will veto, but once the issue begins to roll, once the rest of Europe really opens its eyes to the dull, boring staid fact of the French agricultural subsidy, the pressure for reform will become quite intense.

Blair has found the pressure point, the weak link in the whole European chain. He was pushed into it by a characteristic Chirac gaffe of demanding that Britain surrender the rebate.

This caused M. Blair to parry and riposte directly on an economic line...a line that has been unmentioned, untested, indeed sacred throughout the whole history of Europe.

What could emerge from this is fascinating, because France, like Russia, is at heart an agricultural nation. Were France to be forced by the collapse of the PAC to change to a market economy in the agricultural sector thanks to the loss of subventions, it would radicalize France economically.

Everything would change.
First would be the resistance, with the general strike and the farmers blocking roads. This never fails against the French government, but this time, the governments withholding the money and desired policy will be foreign, beyond the grasp of Paris.
The government will fall, but no government can resist the tide.
And there is not the money in France to maintain the PAC on French finances.
And so the French agricultural sector, the only sector in which there are millions of individuals with fonds de commerce, would be forced to change. Unemployment will be terrible. Social unrest, difficult.

But the paradox will be that the most staid and traditional of all sectors will be forced to become agile, to consolidate, to CHANGE, and to become competitive to European norms (which will still resist American Frankestein foods and chemically treated meats).

And then it will be the farm sector that has actually reformed into a modern economy. And that will drag along the rest of France with surprising speed, because of the distribution of deputies across the provinces and the concentration of rural power in the Parliament that all of these seats gives.

One could never have guessed that it would happen this way, but if M. Blair remains firm, he will do the greatest service that can possibly be imagined for France.

Ah, but here is where there are blinder on.

Efficiency in agriculture does not perforce mean gross conglomerates. That merely produces superabundance.

Consider what France does exceptionally well: quality niche marketing. France does not produce the most wine in the world, but at the top end, French wine is the majority.

France does not produce the most perfume, but the high end is the French niche.

Certainly tissue makers in bulk cannot compete with China, and yet the Chinese do not remove the market for the finest silks and designer clothes and leathers from the French.

Agglomerated farms, like the mass wine communes, produce Frankenstein food. But Europeans, in particular, prefer very high quality organic foodstuffs. They will pay a small premium for them. Certainly there needs to be a common agricultural policy, but that policy can be rather simple: foods are not to be imported that are filled with chemicals and genetic modifications, foods are not to be imported from lands with very low hygeine standards, foods are not to be imported from lands where agricultural workers are not paid a living wage. This is the appropriate barrier.

Remove the CAP, and some farms will fail. But others will not. They will produce in their niche, and being smaller operations, they will not strive for bulk but for the cachet of organic quality, for which people consistently pay a premium. The market does need to be protected from the dumping of foods grown by slaves and mulched with human feces, yes, but the still-rigid nature of French worker law, and the relatively low margins, will not result in a sudden rise of massive farms in France.

There is no reason to believe that M. Durand who now grows mustard and endives cannot continue to do so. Some will get out of the business, but others will not. There is a grand market for high quality food products that are grown organically, and the smaller farms characteristic of France are ideal for such operations. The premium on organic food is about 300% of the commoditized industrial product, and it tastes better too.

Cooperative equipment sharing operations will continue to be required, but there will be no longer any reason to grow things to a quota.

There will be a shakeout, but it will not be the end of the family farm, if the family has the sagacity to enter organic farming and focus on quality. One hectare of organic produce produces the same profit as three hectares of industrial.

Actually, the most interesting subtext to all of this from the perspective of French politics is that damage that this will do to Dominique de Villepin.

The common wisdom was that Chirac raised Villepin to PM and Sarkozy to Minister of the Interior to elevate Villepin's star by giving him domestic leadership to augment his foreign policy "leadership".

But, ilico presto!, M. Blair tosses a foreign policy bomb that will have profound implications for domestic France. Villepin was a very arrogant but also very ineffective diplomat, and those skills we be called upon again as agriculture - a backbone of the domestic economy - comes into play.

All Sarkozy need do is hold a firm line against immigrants - a popular position - while Chirac and Villepin both twist in the win in what is perhaps the most politically deadly combination of foreign policy and domestic economics to come along in a generation.

France will end up better off for it too.

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