EU expert Charles Grant: Czech reluctance to join euro incomprehensible

10-03-2008

Charles Grant is the director of the Centre for European Reform, one of the UK’s leading pro-EU think tanks. When we met in Prague recently, the conversation ranged from next year’s Czech presidency of the European Union to whether the Czechs should adopt the euro. But my first question for Charles Grant was: what impact have the recent enlargements had on the EU?

“I think the biggest impact of the 2004 and 2007 enlargements has probably been to change the balance of power within the EU. France and Germany no longer dominate it like they used to. They’re still very important and very influential, but we now have a gang of countries within the EU which are broadly speaking Atlanticist and economically liberal. They’re not federalist in their thinking on institutional questions, they are pragmatic.

“This means that the British view of Europe is echoed to some degree, if not totally, in the central and eastern European countries who’ve joined. Which means that the old Federalist view, and any attempt to turn the EU into an anti-American organisation is really very much a minority view and would have no chance of success.

“I think the biggest change therefore has been strategic, in the way that the EU gets on with other bits of the world, like the US.”

Generally speaking, how you say the new members have fared within the EU?

“I think most of the new members have done pretty well. They’ve been constructive on a number of issues. Of the 12 new members we’ve had in 2004 and 2007 I would say two have been particularly problematical. One of them is Poland, and when the Kaczynskis were in power in Poland, and when Jaroslaw Kaczynski was prime minister in particular, Poland was very much on its own. It was quite disruptive of relations within the EU, it picked fights with the Germans and the Russians and I think its partners found it very difficult to deal with – Poland became quite isolated.

“That problem is much better now because we have a new government led by Donald Tusk, which is a more moderate government.

Photo: European CommissionPhoto: European Commission “The other really difficult country to integrate has been Cyprus. Cyprus is obviously rather different to the others. It’s an island, it’s neutral, it’s physically a long way away from the rest of the EU and it has a particular problem with Turkey, of course because 40 percent of the island is occupied by Turkish forces.

“Cyprus has, from the point of view of most EU countries, been very obstructive in preventing a settlement of the Cyprus issue and a resolution of its own disputes with Turkey.

“So I’d say most countries have integrated very well. There’ve been one or two problems, particularly Poland and Cyprus. But the Czech Republic, like most other central and east European countries has been a constructive and good member of the EU.”

Do you think the countries of the European Union will succeed in ratifying the Treaty of Lisbon this year? And will we see it come into effect in the first half of next year, during the Czech presidency?

“Yes, I think it is likely that the Treaty of Lisbon will be ratified by all 27 members this year. The biggest uncertainty is probably the Irish referendum. I don’t how that’ll go, but I guess it is likely though not certain the Irish will vote yes to the treaty.

“The British Parliament is highly likely to ratify by the summer. As far as I know no other parliament is likely to block the treaty, so I think it is probable that the treaty will be ratified on time. Though in practice, many of its provisions, such as the new External Action Service [an institution intended to implement more effective and coherent foreign and security policy] will probably not be up and running by the beginning of the Czech presidency, so it’ll be up to the Czechs to build these new institutions.”

What would you say are the biggest potential benefits and pitfalls of a relatively small country like the Czech Republic hosting the EU presidency, or being the EU president?

“It’s very important for its bureaucrats, especially if it’s a new member, like the Czech Republic, and a smallish one. But the truth is presidencies aren’t very important, they don’t set the agenda in the real world. Because if you set the agenda for six months – and that’s all the presidency can do – you don’t change what’s happening.

“Because most EU legislation, measures, programmes, projects take years and years to put together and complete. So one presidency really can’t make much difference.

Photo: European CommissionPhoto: European Commission “Presidencies seldom make much difference…they do have the potential to mess things up, so they can damage things. The last French presidency in the year 2000 was particularly badly organised, because of the problem of cohabitation between Jospin and Chirac, two different parties represented in the government. That was a particularly difficult one, they messed things up. Most presidencies at best can hope not to mess things up.

“Once or twice in a blue moon you get one presidency that is extremely successful and makes a difference. These are usually ones from large countries – I’m thinking particularly of the German presidency in the first half of 2007 that did the deal on the Lisbon Treaty, did the deal on climate change, very difficult issues tackled very well by Angela Merkel.

“I think a small presidency cannot hope to knock heads together and clinch a whole load of deals, as the Germans did. A small presidency should aspire not to mess up. That’s a very good objective to have.”

The Czech Republic was saying that they wanted to adopt the euro in about 2009. Now they’re saying who knows, they won’t even set a target date. Do you think it makes a concrete difference if they don’t join the eurozone?

“I’m not a Czech but I must say I’m rather puzzled by the attitude of some Czech people to the euro. I come from Britain and Britain of course, like the Czech Republic, is not in the euro. But one can at least understand why the British are not in the euro, because we do do quite a lot of trade with America, we do trade with other parts of the world, we have a big economy, and we have quite a big currency actually which is a global currency – sterling.

Photo: European CommissionPhoto: European Commission “I myself would favour Britain joining the euro, but there is a strong case to be made for having an autonomous monetary policy, because our economy is big enough to be managed on its own.

“I think the Czech argument though for not joining the argument is, to me, incomprehensible. Your economy is so intimately bound up with the German economy and the other euroland economies. I think roughly 70 percent of your trade is with the euroland and when Slovakia joins the euro, as it will quite soon, it’ll be an even higher figure.

“Given that so much of your trade is with the eurozone, given that you have a very small economy, it doesn’t really make sense to have an autonomous economic or monetary policy that is different from your neighbours and given that your own industry is being seriously weakened by the high of the Czech crown against the euro it’s harder for you to export. I know your car industry with Skoda have huge difficulties with the exchange rate…

“Given all these factors it seems to me absolutely weird that you’re not trying to join the euro as soon as possible. I don’t see any economic justification for not this. But I’m not a Czech so I obviously don’t understand the intricacies of Czech politics.”

10-03-2008