The European Union in 1999: Finances, Institutions, and War

Four ECSA members analyze key events during 1999 in the European Union.

THE GERMAN PRESIDENCY OF the European Union (January-June 1999) inherited a full political agenda, including the long-awaited launch of the new single currency, as well as the negotiation of the Commission's "Agenda 2000" financial package. In addition to these pre-scheduled issues, however, the German Presidency also encountered two major institutional developments-the resignation of the Santer Commission in March, and the election of a new center-right majority in the European Parliament in June-and a major foreign policy issue, namely NATO's war in Kosovo and its aftermath. In this ECSA Review, four ECSA members analyze the events of the German Presidency and discuss their implications for the long-term development of the Union. In the first of the following four essays, Carl Lankowski reviews the "Red-Green German Presidency," with particular attention to the ways in which the Presidency was shaped by the domestic politics of Germany's first federal coalition between the Social Democratic Party and the Greens, as well as the intra-party rivalry between Chancellor Gerhard Schröder and Finance Minister Oskar Lafontaine, whose resignation in March opened the way for a more centrist approach from the new government. Next, John Peterson examines the surprise resignation of the Santer Commission, and reassesses our scholarly evaluation of Santer in light of the Commission's political demise. In the third essay, Brigid Laffan analyses the negotiation and outcome of the Berlin European Council, which agreed the Agenda 2000 financial package for the period 2000-2006. The final package, Laffan points out, limits the Union to its existing financial ceiling of 1.27% of the Union's GDP, but the new financial perspectives are likely to come under strain when new members begin to join the EU early in the next century. Finally, Amie Kreppel discusses the historic victory in the June European Parliament elections of the center-right People's Party of Europe, which won a larger number of seats than the Socialist group for the first time in two decades. The resulting polarization of the Parliament into left- and right-wing blocs, she argues, may introduce a new ideological debate into the Parliament, but it does so at the risk of endangering the legislative capacity of the Parliament, and thus of the Union itself.

Germany's 1999 EU Council Presidency
Carl Lankowski

THE SEPTEMBER 1998 FEDERAL elections led to a national coalition government of Social Democrats (SPD) and Greens (Bündnis 90-Die Grünen) with a nineteen-vote Bundestag majority and raised expectations about the orchestration of an EU reform agenda. After all, the German result meant that social democratic participation in national governments figured in all but two EU Member States. And both Germany and France, together traditionally the motor of integration, sported ministers of environment wearing the green party label, and environment is an issue-area with a particularly ambitious European vocation. Overall, this constellation might be said to embody an important juncture in the EU's evolving political culture.

Germany's Green Foreign Minister Joschka Fischer stood well within the rhetorically "post-Westphalian" tradition of his party as he launched the presidency with a speech on January 13 to the European Parliament. The speech was notable for its forthright arguments in favor of developing and formalizing the EU as a constitutional order aspiring to greater social balance that is also inclusive of eastern Europe.

While the German presidency managed the big issues and surprises it inherited well and did manage to set some policy accents, problems of coordination led to some blunders and rhetoric outran policy deliverables in at least one key area. The central inherited agenda included the "Agenda 2000" financial package, the European employment pact, and the launch of Economic and Monetary Union, which started on schedule with the New Year and without major problems. The major surprises were the resignation of the Commission on March 16, necessitating the nomination of a new Commission president, and the war in Kosovo (NATO's air campaign was launched on March 24). In addition, the Amsterdam Treaty came into force, which mandates a more ambitious EU role in foreign, security and defense affairs. "Amsterdam" also assigns greater legislative and countervailing powers to the European Parliament, the regular election of which occurred in June.

The German presidency booked two signal achievements. The first was the successful outcome of the March 24-26 European Council in Berlin devoted to Agenda 2000, which established a financial framework designed to accommodate the first stage of eastern enlargement without breaking the budget (see Laffan essay below).

The second major success of the German presidency, the EU response to the Kosovo war, may presage a major turning point in its ability to pursue a common foreign and security policy. German leadership played a central role in this critical process. Foreign Minister Fischer's "six-point plan" provided an essential strategic framework for resolving the crisis in a manner that would hold NATO together, bring in the Russians, and define a role for the EU. That role is now materializing in the form of the Stability Pact for South-Eastern Europe, the outline of which was agreed at the June European Council in Cologne. Implicitly, this role also includes the possibility of EU military operations in similar circumstances, even without direct U.S. participation. The political dimension of Fischer's leadership was notable for its effect on the political ethos within and beyond Germany. To send German combat troops outside the NATO area, and for the first time not as part of a UN contingent, it was necessary to make the case for German international responsibility through Europe and with the Americans to skeptics in his own party and to the political class generally.

Still, the outcome to date also reveals how little European integration had resolved the question of a European Security and Defense Identity (ESDI). After all, the air war was only possible because of the availability of U.S. planes, ordinance, logistics, intelligence and communications capabilities, systems which since the collapse of the Soviet Union have developed at a tempo that calls into question the basic technical inter-operability of NATO's national contingents. In this sense, the post-hostility celebration of European unity at the Cologne European Council in June, the naming of NATO Secretary-General Javier Solana as the first "Mr. CFSP," and the July Anglo-Italian initiative for European defense consolidation are rhetorical down-payments on defining the kind of actor "Europe" can be, as well as the interests on behalf of which and the circumstances in which it will act.

Germany's "red/green" government was not as successful on the employment and macroeconomic policy fronts. Finance Minister Oskar Lafontaine was the co-architect of the SPD 1998 federal electoral victory and chairman of that party. Inspired by France's notion of a countervailing power to the ECB, an ambitious strategy of euro-zone macroeconomic policy coordination was to have played a central role in reducing unemployment, the government's central objective. Lafontaine armed himself for the task by relocating responsibilities for EU policy coordination from the economics ministry to his own ministry, along with the statistical and economic forecasting units. The heart of the strategy was to be a program of controlled reflation designed to create the headroom for structural economic reforms prepared by neo-corporatist dialogues between representatives of management and employees, both at EU (Employment Pact) and national (Alliance for Jobs) levels. Already in October, Lafontaine began jawboning the Bundesbank to lower its interest rates to sustain a broad-based recovery and transferred his public pleading to the ECB after January 1. But Europe's central bankers were not amused by what they perceived as an encroachment on the perceived autonomy of the new institution. The German finance minister antagonized some of his EU counterparts when designs for tax harmonization were floated and irritated business in Germany with his domestic tax package. Also subjected to intramural sniping, rumored to have been encouraged in the Chancellery, Lafontaine resigned his government, party, and parliamentary posts dramatically on March 11, eerily presaging a change of course that parallels that undertaken under the Mitterrand government in 1983, when Jacques Delors was installed with the mandate to bring France into conformity with its neo-liberal European environment. The equivalent German shift in policy was signaled three months later with the publication of the long-awaited Blair/Schröder "third way/new middle" reform paper released the week before the European Parliamentary elections. Thin in substance, the paper signaled "more market," a smaller and more effective public sector, and greater personal responsibility, though not a "market society."

However, encouragement issuing from the new single market/monetary union framework to greater flexibility in product, capital and labor markets gives the Blair/Schröder paper the look of a lagging rather than a leading indicator. The Agenda 2000 agreement preserves the basically austere fiscal architecture of European integration. In this context, the much-vaunted EU Employment Pact could add little more to the process begun in Essen in 1994 during the last German Council presidency than a commitment to hold "macro-economic dialogues" in ECOFIN Councils.

Paradoxically, German leadership was weakest and coordination problems most in evidence in the policy area in which it had enjoyed its strongest reputation: the environment. Germany did put the idea of an energy tax back on the EU agenda, preparing for it well with the adoption of its own domestic eco-tax. But since it was a tax, the project fell within the domain of the finance ministers. Indeed, the high expectations environmentalists placed in Germany's Green Environmental Minister Jürgen Trittin were subverted on several occasions, most dramatically when Schröder, bending to lobbying from Volkswagen, instructed Trittin to hold up implementation of the already agreed end-of-life auto-recycling directive. The latter action led to an immediate uproar within the EU environmental policy community that encompassed the Commission and all of the other environmental ministers except the British, whose Prime Minister Tony Blair was lobbied by Schröder on the matter. Still, some progress was achieved in advancing strategies to integrate environmental dimension into other policy areas, and on chemicals policy and labeling of genetically modified organisms (GMOs). In the end, the NGO verdict on Germany's environmental policy stewardship is revealing: "In EU policy the German government showed almost no respect for its European partners, above all the smaller ones, and showed little understanding of and sensitivity to political procedures and decision-making processes in Brussels" (see Greger 1999).

Outside of NATO, transatlantic relations were taken up in the semi-annual US-EU Summit, held on 21 June in Bonn. The fact that Germany also chaired the G8 this year simplified coordination over resolving the Kosovo conflict and formulating Balkans Stability Pact. In advance of the summit, yet another transatlantic civil society dialogue was launched. The Transatlantic Environmental Dialogue (TAED) brought representatives from several dozen American and European NGOs together from 1-3 May in Brussels in a meeting hosted by the European Environmental Bureau (EEB). Several working groups were formed, which released statements at the NGO-government forum phase of the exercise that were critical of the fundamental lack of attention to sustainability issues in the Transatlantic Economic Partnership (TEP). For their part, the governments agreed at their June summit to set up an "early warning system" to head off trade disputes over hot button issues in sectors such as agricultural biotechnology going into the WTO ministerial scheduled for November in Seattle.

Despite its election-conditioned late start and lack of seasoning, the Schröder/Fischer team acquitted itself reasonably well in directing the first red/green EU Council presidency. While Fischer reassured his colleagues with respect to Germany's fundamental commitment to deeper and wider integration and demonstrated an impressive ability to bind the 68ers to this project even when it required compromises with fervently held beliefs, Schröder represented German interests with a directness that his predecessor would not allow. Sometimes lines were crossed and sensitivities needlessly abraded. So it is emblematic that Germany's EU stewardship came to a close with the Chancellor instructing his ministers not to participate in Council meetings where German was not used as an official working language.

FOR YEARS, THE RUNNING gag about the European Commission was that half of its officials worked far too hard for their own good, and the other half did no work at all. The trouble was that it was impossible to tell which half was which. Like most allegories, this one had an element of truth. Starting in the mid-1980s, the Commission began to take on a progressively wider and more ambitious array of policy tasks, especially after 1989 when it became the ringleader of western aid to the East, without anything close to a commensurate increase in resources. Metcalfe's (1992) portentous portrait of a Commission destined to drown in a sea of responsibilities, most of which it had accepted with great enthusiasm and pride, had more EU scholars than usual scrambling to get hold of the Australian Journal of Public Administration.

Few scholars doing fieldwork in Brussels during the latter part of Jacques Delors' Presidency (1985-94) could have failed to notice that the Commission had become overburdened, under-resourced, and badly managed. The power of cabinets, or personal advisors of Commissioners, to intervene in the work of the services on behalf of national capitals was one of the great untold stories of Brussels policy-making, until Ross' (1995) insider's study of the Delors cabinet was published. The Commission appeared relatively unconcerned about results and implementation, as opposed to fresh ideas and initiatives. No one pretended that the internal market really existed at the end of 1992. The EU's eastern aid programmes, PHARE and TACIS, saw large amounts of money earmarked for purposes (and recipients) ranging from laudable to dubious, with manage- ment in the hands of a very few, often quite young, and ferociously overworked officials. The Maastricht Treaty negotiations produced a result at odds with the Commis-sion's (especially Delors') preferences. Denmark's rejec-tion of the Treaty in the 1992 referendum, followed by the Bosnian war, cast a pallor over the end of the Delors era.

Jacques Santer was nobody's first choice to succeed Delors, but his commitment to "doing less, but doing it better" seemed a sensible tonic for the Commission. A pared-down legislative agenda was inevitable after the single market programme was essentially finished (if far from fully implemented). Still, most proposals tabled by the Commission after 1994 seemed better-researched, more cost-conscious and less picked at by cabinets. In contrast to Delors, Santer took an avid interest in the management of the Commission, particularly rivalries between its services (i.e., industry v. environment) and Commissioners. Finan-cial management preoccupied the Commission in ways unimaginable during the Delors years, with Budget Commissioner Erkki Liikanen seeking to establish a new "value for money" ethos. An ambitious internal evaluation entitled Designing Tomorrow's Commission was launched in 1998 to try to cut down on duplication, overlap and waste.

Most assessments of the Santer Commission have emphasised a changed political environment, far less conducive to "great leaps forward" in European integration. Many have acknowledged Santer's lack of vision, but still been upbeat about his reformist ambitions. Contributing to a comparative study of political corruption, the present author concluded that-given all of its limitations and frailties-the Commission was a "remarkably proficient bureaucracy" (Peterson 1997: 562). A later, retrospective appraisal argued that Santer "had earned a reputation as a competent, 'safe pair of hands'" who had, above all, presided over the launch of the Euro, which was "surely enough to earn any Commission President a proud legacy" (Peterson 1999: 61).

Before the latter analysis was even published, Santer had resigned in disgrace. The report of a "Committee of Independent Experts" (1999: 144), convened by the Euro-pean Parliament (EP), into allegations of nepotism and mismanagement in the Commission offered a devastating critique of a bureaucracy in which it was "becoming difficult to find anyone who has even the slightest sense of responsibility." Whatever future historians conclude, Santer's legacy seems unlikely to be "proud."

Were EU scholars seduced by Santer's (and Liikanen's) reformist rhetoric? The Commission is surely one of the world's most open bureaucracies, in terms of access to officials-most keen to defend their institution- by scholars seeking interviews and advice. Hunters captured by the game? Shame on us? There is no question that Santer showed a lack of political judgment in the spring of 1999. When the Commission's long-running battle with the EP over budgetary improprieties and allegations of nepotism (especially against Edith Cresson) came to a head, Santer's acknowledged lack of political weight (see Peterson 1999: 52-54; Peterson and Bomberg 1999: 41) cost him dearly. It is also clear that Santer-by all accounts amiable, affable, and known to friends as "Champagne Jacques"-was a victim of bad luck.

The Santer Commission did more than any before it to try to improve the way the "house" worked (see Laffan 1997; Peterson 1997; Cram 1999). It encountered a formidable array of problems and obstacles to reform, many of which had become long and firmly rooted. Nine months before Santer's humiliating exit, EU Heads of Government had agreed a declaration at the June 1998 Cardiff summit congratulating the Commission for its efforts to improve its efficiency and management.

The "Independent Experts" had exactly five weeks to compile their report, yet went into painstaking detail about allegations that extended far back in time. In fact, most of the serious improprieties it uncovered-besides Cresson's -occurred during the Delors years. The bitter animosity between Delors and the Experts' chair, André Middlehoek, dating back to the latter's tenure as head of the EU's Court of Auditors, was clearly manifest in the report. The report revealed how personal battles can quickly become inter-institutional in EU politics.

Once the Experts' report was published (on 15 March 1999), matters moved much faster than Santer could control them. With an EP vote on a motion of censure pending, the Socialist Group leader, Pauline Green, said she would urge her group to vote to sack all 20 Commissioners on the strength of the report. Santer reportedly pleaded with Cresson to resign, and tried to convince both the French President and Prime Minister, Jacques Chirac and Lionel Jospin, to urge to her to do the same, but was rebuffed by all three. At an all-night meeting of the college of Commissioners, Santer prevaricated and gave no clear lead. Eventually, Neil Kinnock (Commissioner for Transport) and Karel Van Miert (Competition)-both Socialists, like Cresson (as well as one other Commissioner, precisely whom is disputed) unveiled letters of resignation to their colleagues, urging each of them to fall on their swords, too. If all members of the college except Cresson did likewise, according to the thinking, then the EP's motion of censure would be highly personalised since Cresson would technically be the "entire Commission." When the drift of the meeting became clear, Santer urged that the entire Commission, since it was a collegial body, should resign. But the idea did not originate with Santer.

The following morning, Santer appeared at a press conference that was the focus of intense, pan-European media interest, a very rare commodity in the EU. Santer was combative and petulant, insisting that the Experts' report was "wholly unjustified in tone." Santer's defiance was clearly ill-judged but his fate appeared to have been sealed by a random interpretation gaffe. Asked about charges that his wife had real estate interests in buildings used by the EU in Luxembourg, Santer responded (correctly) that the experts' Report (p.133) had found the charges to be unfounded. Thus the President declared (in French) himself blanchi, or exonerated and free of guilt. Yet, the phrase was interpreted into English as "I am whiter than white," a sound byte which led most stories in the English-speaking media (including the BBC and Financial Times). Language can still be a formidable barrier to understanding in the New Europe.

Afterwards, Santer's support evaporated quickly. José María Gil-Robles, the President of the EP (and, like Santer, a Christian Democrat), bellowed that the entire Com-mission had to "leave now and not in nine months time." Even the former British Prime Minister, John Major, Santer's main backer in 1994-describing him then as "the right man in the right place at the right time"-admitted that he had been "the wrong choice."

Less than ten days after Santer's resignation, the European Council chose his successor, the former Prime Minister of Italy, Romano Prodi, at the Berlin summit. In assembling his new team, Prodi's own prerogative was strengthened considerably by new Amsterdam Treaty provisions-for which Santer had campaigned hard- stating that future Commissioners would be nominated "by common accord with the nominee for President" and "work under the political guidance of the President." Prodi did not veto any national candidates for the Commission and had to operate within distinct political limits. Yet, several of his own preferences clearly were heeded (see Peterson and Bomberg 1999). Afterwards, Prodi bluntly insisted that his Commission would act as a "European government," with himself playing the role of Prime Minister. His own sweeping proposals for reforming the Commission, and consolidating his own power over it, explicitly drew on the final report arising from Designing Tomorrow's Commission.

Santer thus became the EU's Gorbachev: swept away by the tide of reform he himself unleashed. The launch of the Euro was, at least, an administrative triumph for Santer, but the political battle had already been won, in key respects, by Delors. Not everyone in the Commission liked or supported Delors, but his dynamic leadership created a powerful esprit de corps. In times of trouble the Commission closed ranks, defended the institution, and articulated a vision of a united Europe that rallied key allies, including many in the EP. Santer's lack of vision, and comparatively weak leadership, left him isolated when crunch time came in March 1999.

Interesting days are ahead for students of the Commission. Arguably, the new Commission looks less impressive on paper than its predecessor, but Prodi has very high ambitions for restoring the Commission's prestige. Failure is likely to mean a permanent swing in the institutional balance of power towards the Council (and, in some respects, the EP). Of course, advocates of intergovernmentalist models of EU politics would argue that it makes little difference who heads the Commission: personalities and institutions don't really matter, at least compared to national preferences. We shall see.

THE FUTURE FINANCIAL PERSPECTIVE for the European Union agreed at Berlin (24-25 March 1999) was the third major budgetary package deal negotiated by the Union since February 1988. The aim of this brief assessment of the Berlin agreement is to analyse the processes that led to the final deal and the outcome that was achieved.

From Proposals to Negotiating Framework

The boundaries of the negotiations were established by the July 1997 Agenda 2000 proposals that set out the Commission's opinions on the applicants, the future financing of the budget from 2000 to 2006, and related reforms of the structural funds and the common agricultural policy (CAP). The Commission's proposals were conservative and cautious. The Commission pitched the "own resources" ceiling at 1.27 per cent of GNP, the level agreed for the Delors 2 package. Within this ceiling, the Commission proposed some increase in structural spending and extensive reform of the milk, beef and cereal regimes.

At the Cardiff European Council (15-16 June 1998), March 1999 was set as the deadline for agreement on the overall package. Consequently the future financial package was a central part of the Austrian Presidency programme (latter half of 1998) and the top priority of the German Presidency (first half of 1999). The negotiations were taken very seriously in all of the national capitals and by the EU institutions because the outcome would have an impact on the relative benefits and costs of the EU budget for some time to come. The negotiations were broken down into three negotiating chapters or "boxes"-the future financial perspective, the structural funds, and the CAP. The General Affairs Council acted as the overall co-ordinator and filter to the European Council, where all of the critical decisions were taken. The ECOFIN Council dealt with the financial aspects of the financial perspective and the Agricultural Council was responsible for the CAP dossiers. The formal Council sub-structure-COREPER, the Special Agricultural Committee and the relevant working parties-met intensively during the German Presidency. This formal institutional structure was augmented by a number of high-level groups that were crucial to an agreed outcome. These were a Friends of the Presidency Group, a Structural Actions Group (Treasury attachés in the Permanent Representations) and a third group involving the Secretaries General of the national agricultural ministries. The complexity of the issues required a strengthening of the formal Council system to add negotiating capacity.

From Framework to Deal

The main cleavage was between the net beneficiaries and the net contributors but there were others. There were differences between the big budgetary paymasters and those that contributed proportionately less, between the CAP supporters club and those wanting deep reform, and between the UK with its tailored made rebate and those arguing for a generalised rebate system. A key feature of the Agenda 2000 negotiations was the high decibel demands from the net contributors for a more equitable system of burden sharing. Germany was to the fore in demanding a reduction in its onerous contributions. The Netherlands was also a key player in the net contributors club as it had become a major contributor in per capita terms. Sweden and Austria, two new member states, added to the chorus of states demanding a fairer budgetary deal. France, as a marginal net contributor, was identified as one of those states that would have to carry a larger financial burden. While recognising that there would have to be changes, France was not going to surrender its receipts from the CAP without a fierce diplomatic battle. The UK wanted to protect the status quo, especially its rebate system. 

The net beneficiaries or the cohesion club wanted to maintain the key features of the Union's cohesion policies. Spain adopted a very entrenched negotiating position, aided by Greece and Portugal. Ireland found itself in a difficult position as economic growth in the 1990s decisively altered its socio-economic position. The applicant states were bystanders to the internal EU negotiations, knowing that failure to agree to a new financial package would undermine their bid for membership.

In October 1998, the Commission published a report on the system of "own resources," a report that was designed to illustrate who paid what and who benefited from the EU budget. The report confirmed that Germany, followed by Sweden, Austria, the Netherlands and Britain were the paymasters. It also illustrated that the UK rebate was no longer as justified as it once was. The Commission, in a proposal that would prove highly controversial, suggested that a partial re-nationalisation of the CAP would re-balance the budget and would alleviate the costs of the CAP.

When the German Presidency took over in January 1999, it faced the formidable task of getting unanimous agreement from the member states on the overall package. Few would have predicted that this could be achieved. Yet in Berlin, the member states reached agreement after a tortuous summit which was preceded by a very intensive round of meetings at all levels in the Council hierarchy. The agreement was achieved in traditional EU style by a series of compromises and deals. Germany was faced with the trade off between a successful Presidency and its domestic preferences for a much reduced contribution to the budget. The Schröder government opted for a successful presidency, confirming the well known insider view that "the Presidency costs." Three events in March-the resignation of German Finance Minister Oskar Lafontaine, the resignation of the entire Santer Commission, and the outbreak of war in Kosovo just as the government leaders met in Berlin-added urgency to their task.

What Kind of Deal

At an early stage in the negotiations, the member states agreed to ring-fence pre-accession aid and budgetary resources for the applicants once they joined. The proposals identified 2002 as the earliest possible date of entry. If a longer time frame, as is likely, for accession is required, the enlargement reserve cannot be used to finance policies in the existing union (see Table 1). The message on enlargement was that it was affordable and could be accommodated within tight budgetary limits (for the details of the agreement, see the Berlin Presidency Conclusions on the Web at europa.eu.int/ council/off/conclu/mar99_en.htm).

The Commission's "own resources" report and the caution of its original proposals meant that budgetary stabilisation was central to the outcome. By March 1999, the key debate was about how much money should be allocated to overall Union expenditure, and how this should be distributed among the different budgetary headings. The Commission's projected commitments budget for 2006 of 105.2 billion euro (EU 15) was reduced to 90.2 billion euro at Berlin. The out-come was thus a consolidation of the European Union's public finance capacity rather than the significant increases recorded in 1988 and 1992. The ceiling on payments as a percentage of gross national product was pitched at 1.13% for 2006, well within the 1.27% in the existing "own resources" margin.

Agriculture proved, not unexpectedly, to be one of the most difficult issues to achieve agreement on. The Commission's proposal that there should be a partial re-nationalisation of the CAP failed to fly when faced with the implacable opposition of the French. The outcome on agriculture fell well short of the Commission's proposals for reform. An Agricultural Council agreement in early March 1999 was seriously diluted at Berlin, when President Chirac played the "green card." Reform of the dairy regime was postponed, and the Commission's proposed cereal price cut of 20 per cent in 2000 was diluted to a reduction of 15 per cent in two stages by 2002. There must be serious questions over the outcome on agriculture, particularly its compatibility with the direction of world trade negotiations and the prospect of enlargement. A number of review clauses on agriculture in the Berlin Conclusions could well mean that the agricultural outcome agreed at Berlin will not survive intact to 2006. Spain proved to be the most trenchant negotiator on cohesion policy, unwilling to accept anything less that the 237 billion euros proposed by the Commission for cohesion spending over the seven year period. Known by its partners as the "no, no, no state," its position began to shift in the lead-up to the European Council. The Berlin outcome amounted to 213 billion euro.

Unfinished Business

The EU managed to find the negotiating capacity to agree a deal at Berlin, notwithstanding the complexities and controversies of the issues at stake. In the end, none of the member states wanted to re-open the bruising budgetary battles of the past. The shadow of Kosovo and the institutional crisis engendered by the demise of the Santer Commission was sufficient to promote compromise. Although the German Presidency gained, German domestic preferences were once again sacrificed. France and the UK clearly won the diplomatic game although the question of a generalised rebate mechanism and further reform of the CAP will return to the agenda. The cohesion states managed to protect financial flows from the structural and cohesion funds, although this package must be viewed as the last large envelope they are likely to receive. The Berlin financial perspective remains a pre-enlargement perspective, an agreement for the fifteen.

THE JUNE 1999 ELECTIONS were significant for the future of Europe in several respects. An unprecedented level of apathy among European voters marked the latest elections. Overall turnout was the lowest ever at just under 50% with an all-time low of 23% in the UK. Additionally, for the first time since direct elections began in 1979 the center-right People's Party of Europe (PPE), now the PPE and European Democrats, gained a plurality of the 626 seats in the European Parliament (EP). With 233 seats they hold over 50 seats more than the 180 seats controlled by the second largest party, the Socialist Party of Europe (PSE). Most recently, during the first plenary session of the new Parliament (July 19-23) these electoral results led to the first seriously contested election for the position of President of the EP since at least 1989 when the two largest groups agreed to rotate the post between them every 2½ years. While much attention is currently being given to the European voter apathy and low turnout, I focus here on the emerging potential for an ideological divide in the newly elected EP and the possible consequences for the EU as a whole.

There were three candidates officially contesting the July Presidential election: the Finnish Green Heidi Hautala, the Portuguese Socialist Mario Soares and the French PPE candidate Nicole Fontaine. Although the latter easily won in the first ballot, the political drama surrounding her election was unprecedented in the last 15 years. Generally the PPE and PSE agree ahead of time on a candidate and the other party group waits until the second half of the parliamentary term for their candidate to hold the office. In the most recent presidential elections neither party group was willing to wait so both ran candidates (a third candidate from a smaller group like the Greens frequently runs but is of little practical significance). There were numerous political reasons for both the PPE and PSE to insist on their candidate for the first part of the legislative term. The Socialists, expecting to win the elections, had already chosen the distinguished Mario Soares of Portugal and could not easily ask him to cool his heels for a few years. On the other side the PPE felt that it had justly won the right to elect the first president of the term, having emerged as the largest group in the new Parliament. The result was an extremely contentious battle that led to a tremendous increase in the importance of the Liberal group, since whichever side they chose was likely to win. In the end, Fontaine was elected as the first president of the new parliament, with Liberal leader Pat Cox to take over for the subsequent 2½ years of the term. The overall result was to make this presidential election fundamentally different from those of the past 15 years by injecting a level of ideological tension not frequently seen in the EP on major institutional questions.

To understand the impact of the elections and the potential significance of the apparently new sense of competition between the PPE and PSE it is important to remember some basic facts about the EP, its internal structure and its developmental history. The Parliament is the only directly elected body in the European Union. It is also the only body that represents the vast majority of the national level political parties, as opposed to just those in Government. The EP has long been the institutional stepchild of the legislative process in the EU. Between 1958 and 1970 it had only consultative powers and these only in some areas. In 1970 and 1975 it was given partial budgetary powers. In 1986 the first real leap forward occurred in the legislative realm with the Single European Act (SEA) and the addition of the cooper-ation procedure. These powers were expanded further with the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1997 which introduced co-decision I and II respectively. In terms of legislative powers the Parliament is now generally considered to be influential, although the extent of that influence is still very much a subject of debate (Tsebelis, 1996, 1995, 1994; Scully, 1997; Moser, 1996; Kreppel, forthcoming). What is crucial to remember, and I will return to this shortly, is that the EP is not now, nor will it ever be, a legislative hegemon within the EU. The Parliament is an equal (or almost equal depending on your view) partner in what is a legislative triumvirate.

Within the Parliament the PPE and PSE have been the two largest groups since the Parliament was created in 1958 and even before then in the 1951 European Coal and Steel Community (ECSC). Between them they have consistently controlled 50%-70% of the seats in the Parliament. This is significant because it means that together they can accomplish anything, but in opposition they can stalemate the entire Parliament, or even the legislative process as a whole (espe-cially now under co-decision II). During the years following the SEA the two groups have consistently worked together to further the institutional and legislative interests of the EP as a whole (Kreppel and Tsebelis, forthcoming; Kreppel, 1999, 1998). Although there are clear areas which divide the two groups ideologically, and for which compromise is not possible, they vote together between 60%-70% of the time across legislative procedure and stage (Kreppel, 1999, 1998).

The high level of cooperation between the two groups has drawn frequent comment and criticisms from within (primar-ily the Liberal and other small groups) and outside of the Parliament (Corbett et al., 1995; Dinan, 1994). The apparent lack of a clear ideological left-right divide in the EP has been seen as a sign of its weakness and institutional immaturity (Westlake, 1994; Nugent, 1994). I address the accuracy of this assertion elsewhere (Kreppel, 1999). What is important here is the potential usefulness of this situation, not for the two parties involved (as is often asserted) but for the Parliament and indeed the European Union as a whole. And here I remind the reader of the cooperative nature of the legislative game in the EU. The Commission, at least a qualified majority of the Council and a majority (or absolute majority) of the EP must all agree for legislation to be introduced and successfully passed under cooperation and co-decision I and II. These two procedures now account for roughly 25-30% of all EU legislation and often the most controversial and significant (such as the single market harmonization plan).

Given that neither the Commission nor the Council, which appoints it, has ever consisted of a single party, or even a single political family, compromise is a fundamental requirement of all EU policy. This is an accepted aspect of both the Council and the Commission. The first consists of national leaders representing national interests and national governments that are generally of the ideological center-left or center-right (but rarely both). The Commission is a "collegial" body that works under the auspices of collective responsibility. Although officially free from national interests, its Members often take part in political party meetings and are clearly aligned with the major political families. Proof of the importance of the ideological background of Commission Members can be seen in the current debate in Germany over the appointment of a Socialist and a Green as the new German Commissioners despite the landslide of the Christian Democrat CDU-CSU in the June EP elections. Despite the significance of ideology in both of these institutions collegiality and compromise are the norm, so why then should we expect or want ideological dogmatism from the third player in the legislative game?

Although it is tempting to compare the EP to the national parliaments of the Member States and judge it on those grounds, to do so is fundamentally mistaken. The EP has no Government to sustain in office and no single institution in the EU is hegemonic in the legislative arena. While it's true that the Parliament and the Commission are becoming more closely linked since Maastricht and Amsterdam, the relationship is still quite far from the norm in the Member States. The EU executive is fundamentally independent. This frees the Parliament from the need to form static coalitions of the majority versus the minority. In this sense it is very similar to the US Congress. Not unsurprisingly in the USA, where the legislature is also free from responsibility of supporting a Government, there is a great deal of bipartisan activity. Indeed, the similarities do not stop there. In the USA, as in the EU, there is a legislative triumvirate. The House of Representatives, the Senate and the President must all agree for legislation to be passed. Given the norm of divided government in the post war era a similar need for compromise is clear. Even veto overrides require such vast majorities that they must fundamentally be bipartisan.

What does all this mean? Perhaps it means that we should reassess the role of ideology within the EP taking into account the broader EU institutional environment and not national political norms. It means that we should be wary of an ideologically dogmatic EP. This is especially true given the new powers allotted to the EP by the Amsterdam Treaty (particularly co-decision II) and the current ideological divide between the largely left-leaning Council (eleven of fifteen Members are Socialist) and the right-leaning EP majority.1 If the past trend of general ideological compromise were abandoned it is easy to imagine an extremely conflictual relationship developing between the Council and the EP, which have never been on the best of terms. The newly implemented co-decision II procedure now requires that a compromise be reached between the EP and the Council in conciliation if EP amendments cannot be adopted outright or the legislation fails. Thus, a dogmatically ideological Parliament could effectively stall further integration if it were so inclined. At the very least its ability to blackmail the Council has significantly increased and could potentially have a chilling effect on the integration process. This is particularly worrying given the challenges of enlargement that loom in the not-too-distant future.

This is an extremely brief forum in which to deal with a very complex issue. Several aspects of this potential problem have been ignored such as the details on the voting procedures and the impact of absenteeism on any EP activity. But the fundamental argument is an important one. Anyone who has paid attention to the rhetoric surrounding the EP and the party groups recently is familiar with call for less cooperation between the PPE and PSE and a greater role for ideology. A young member of the Socialist group nicely summed up this position. When I asked if he was disappointed by the decision of Liberals to align with the PPE, meaning that the Socialists would fail to obtain the presidency during this legislative term he replied "not at all, at least now there will be democracy in the EP. I would rather be in the opposition than continue the undemocratic alliance between the PSE and PPE." This may well be a rallying cry for the masses, a way to help raise interest and participation in European elections, but it could also very easily damage the delicate balance that is the foundation of EU integration.2 European integration is fundamentally about compromise between both national and ideological interests. The norm of compromise between the PPE and PSE may have been to due to majority voting requirements or a more base desire for internal power. Regardless, it has served a very real purpose and allowed the EP to have a significant impact of the legislative output of the EU (Kreppel, forthcoming). If it ends and dogmatism becomes the norm, the EP risks at best its own marginalization and at worst the stagnation of EU policy on a broad scale.

1. I say majority because of the recent deal struck between the PPE and the Liberal group, the ELDR. Although clearly labeled a "constitutive agreement" only for the purposes of the Presidential elections and the internal Members Statute, there is a diffused belief within the EP and the press that the deal marks a greater level of cooperation between the two groups against the Socialists and other left-wing party groups.

2. It has been suggested that the lack of an apparent ideological divide is in part to blame for voter disinterest, although the more frequently blamed culprit is the recent Commission scandal that forced the resignation of the Santer Commission in March and reinforced perceptions of EU corruption.

Committee of Independent Experts (1999) First Report on Allegations Regarding Fraud, Mismanagement and Nepotism in the European Commission (Brussels), 15 March, www.europarl/eu.int/experts/en/default.htm.
Cram, Laura (1999) "The Commission" in Cram et alia (eds.) Developments in the European Union. London and New York: Macmillan and St Martin's Press.
Dinan, Desmond (1994) Ever Closer Union? London: Macmillan Press Ltd.
Garrett, Geoffrey and George Tsebelis (1996) "An Institutional Critique of Intergovernmentalism," International Organization, 50: 269-99.
Greger, Nika (1999) "The Environmental Results of the German EU Council Presidency," www.aicgs.org/IssueBriefs/
Hix, Simon and Christopher Lord (1997) Political Parties in the European Union. New York: St. Martin's Press.
Amie Kreppel (forthcoming) "The European Parliament's Influence over EU Policy Outcomes," Journal of Common Market Studies, 37: 3.
______ (1999) "Rules, Ideology and Coalition Formation in the European Parliament," Delivered at the Annual Meeting of the American Political Science Association, Atlanta, GA.
______ (1998) "The Development of the European Parliament and Supranational Party System," Doctoral Dissertation, University of California, Los Angeles.
Kreppel, Amie and George Tsebelis (forthcoming) "Coalition Formation in the European Parliament," Comparative Political Studies.
Laffan, Brigid (1997) "From Policy Entrepreneur to Policy Manager: The Challenge Facing the European Commission," Journal of European Public Policy, 4: 3, 422-438.
Metcalfe, L. (1992) "After 1992: Can the Commission Manage Europe?" Australian Journal of Political Science, 51: 1, 117-130.
Moser, Peter (1996) "The European Parliament as a Conditional Agenda Setter: What are the Conditions? A Critique of Tsebelis," American Political Science Review, 90: 834-838.
Nugent, Neill (1994) The Government and Politics of the European Union (3rd edition). Durham, NC: Duke University Press.
Peterson, John (forthcoming) "EU Decision-Making: Enduring Patterns, Evolving Norms," in Maria Green Cowles and Michael Smith (eds.) The State of the European Union, Vol. V. Oxford and New York: Oxford University Press.
______ (1999) "The Santer Era: The European Commission in Normative, Historical and Theoretical Perspective," Journal of European Public Policy, 6:1, 46-65.
______ and Elizabeth Bomberg (1999) Decision-Making in the European Union. London and New York: Macmillan and St. Martin's Press.
______ (1997) "The European Union: Pooled Sovereignty, Divided Accountability," Political Studies, 45: 3, 559-578.
Ross, George (1995) Jacques Delors and European Integration. New York and London: Polity Press.
Scully, Roger (1997) "Policy Influence and Participation in the European Parliament," Legislative Studies Quarterly, 22: 2.
Tsebelis, George (1996) "More on the European Parliament as a Conditional Agenda Setter," American Political Science Review, 90.
______(1995) "Decisionmaking in Political Systems: Veto Players in Presidentialism, Parliamentarism, Multi- cameralism, and Multipartyism," British Journal of Political Science, 25.
______(1994) "The Power of the European Parliament as Conditional Agenda-Setter," American Political Science Review, 88: 128-142.
Westlake, Martin (1994) A Modern Guide to the European Parliament. London: Pinter Publishers Ltd.

ECSA members receive the ECSA Review, a quarterly periodical, as a benefit of membership. Click here to find out how to join.