In 2006 it seems clear that the European Union is bouncing off the bottom. The steep curve down in 2005 was the product of success: enlargement proceeded so fast that it went beyond the capacity of governance and the EU lost internal focus. There will be twenty-seven members by the end of 2006, and the queue gets longer and longer – an interesting phenomenon for a club allegedly in difficulties.
The transformation from industrial to knowledge economies, managed well by the Nordic countries, will go better in 2006. The smaller economies – Finland, Sweden, Ireland, Austria and so on – continue to boom and, according to the OECD, we can expect a modest recovery in the core economies: Germany and France are on the turn.
Germany has returned as a core player. The agreement at the December 2005 summit was brokered largely by the German foreign ministry and Chancellor Merkel’s team, and, after a long period of stasis and disorientation, Germany’s grand coalition is a powerful combination which agrees on the centrality of Europe. The German presidency in 2007 will be decisive.
In 2006 there will be key decisions on the future of the constitutional treaty. Austria’s presidency in the first half of 2006 will focus in March on the revitalisedLisbon agenda – the economic process – where there will be a swing in the Nordic direction. France and Germany have realised that there is no point in protecting doomed sectors of the economy but you can protect workers by retraining and empowerment. The UK model is unattractive because it is done on the cheap. The spring summit will focus on the reconstruction of welfare and sustainability and proposition that, with China and India industrialising, European social standards represent an entrepreneurial opportunity.
Externally, there has been a big effort to repackage the transatlantic relationship with an allegedly more multilateral Bush mark-2. Now, the further decline of US power in the middle east, and Iraq in particular, brings a new unpredictability, deriving not from US strength but from weakness. A new instability in the administration itself, between the neocon rearguard and the new realists, is critical.
The question of how far the EU enlarges remains central. There clearly are limits because of the visible problem of delivery on expectations. But if we are not to have a Manichean world, the focus must be on putting substance into the relationship with the wider Europe - the commonwealth of Europe. For this to work, it has to go beyond cooperation to include not membership, but some element of shared sovereignty on economic and security issues.
We need a more coherent global architecture, for example on labour migration and rights and how to extend the rule of law. There may be a kind of General Agreement on Tariffs and Trade of the labour market and it might be possible to make progress, on the Kyoto model, with the extension of the rule of law, perhaps through the International Criminal Court, in the context of a weakening United States.